The 10 books that influenced my thinking the most in 2021

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Geopolitical Alpha: An Investment Framework For Predicting The Future”, by Marko Papic (US) (UK):

Geopolitical Alpha: An Investment Framework for Predicting the Future |  Wiley

Instead of focusing on the narrative of the personalities performing on the geopolitical stage, Papic contends that it is much better to focus on the wider context in which decisions are made. It’s only there that you can see the constraints that limit the choice of options. For example, political leaders may say they want a certain political outcome, but constraints limit their ability to actually deliver:

“Material conditions create human reality. Thought systems (philosophy, religion, political parties, etc.) develop around this material condition and are therefore a derivative of it. People cannot “think” or “prefer” their way out of material constraints.”

Herein lies the maxim that underpins the book: “Preference are optional and subject to constraints, whereas constraints are neither optional nor subject to preferences.”

The Great Rupture: Three Empires, Four Turning Points, and the Future of Humanity, by Viktor Shvets (US) (UK):

The Great Rupture: Three Empires, Four Turning Points, and the Future of  Humanity: Amazon.co.uk: Shvets, Viktor: 9781633374102: Books

From the Mongol hordes traversing across Eurasia to the spread of the Black Death, this fascinating book travels through time, and argues that a few key decisions set the tone for the world we find ourselves in today – the downfall of China’s historical omnipotence, the collapse of the Ottoman Empire, and Russia’s isolation from the West. These decisions at a pivotal time in history – the 15th Century – meant that these empires and the countries they represent today fell behind the economic, social and political developments elsewhere in the developed world.

In the second half of the book Shvets peers into the future, to see what recent history suggests the world could look like over the next few decades.

The World for Sale: Money, Power and the Traders Who Barter the Earth’s Resources” by Javier Blas and Jack Farchy (US) (UK):

The World for Sale: Money, Power and the Traders Who Barter the Earth's Resources

Commodity trading firms are the ultimate middlemen, linking the suppliers of raw materials – often countries that are hotbeds of corruption – with consumers in wealthy and emerging economies. They may earn wafer thin margins, but with large volumes they generate huge revenues. Their unique position means that they have become some of the most influential companies in the world. Yet few outside of the commodity trading world have heard their names (Trafigura, Vitol, Cargill…), far less have the remotest idea of the power that they wield.

The World for Sale is the authoritative account of the emergence of the commodity traders, the power that they have to shape economic and political history, and the challenges to their future that they have faced, and at least until now, have overcome. As the book outlines, “They are, in the words of one academic, the visible manifestation of Adam Smith’s invisible hand.”

Butterfly Economics, Paul Omerod (US) (UK):

Butterfly Economics: A New General Theory of Social and Economic Behavior:  Amazon.co.uk: Ormerod, Paul: 9780465053568: Books

Omerod describes a series of experiments carried out by entomologists in the mid-1980’s. The question the scientists were trying to answer was how would an ant colony divide itself between two identical sources of food – each source exactly the same distance away from the colony, and each constantly replenished? On the face of it nothing to do with volatile movements in asset prices.

Rather than choosing from the two sources at random, ants typically went back to the same source again and again, and once back at the colony they would signal to other ants the direction of their food source. Positive feedback dominated and once a large majority of ants visited one site it tended to remain stable for some time. Every so often though ants suddenly shifted and moved almost on mass to the other food source.

The economist Alan Kirman modeled the ants behaviour. Essentially each ant has three possibilities upon leaving the colony: it can visit the source it previously visited, it may be persuaded by a returning ant to visit the other source, or it can decide itself that it will try the other food source.

These three possibilities also guide participants in financial markets. The precise shape of the distribution between ants at one or the other food source, or financial market participants between being bullish or bearish depends upon the persuasiveness with which ants (investors/banks) can convert others, and on the propensity of individuals to change their own minds.

Bubble in the Sun: The Florida Boom of the 1920s and How It Brought on the Great Depression, by Christopher Knowlton (US) (UK): 

Bubble in the Sun: The Florida Boom of the 1920s and How It Brought on the Great Depression by [Christopher Knowlton]

The book details how Florida was transformed from swampland into the most sought after land in America, as developers were spurred on by the potential for vast riches. The boom turned to bust a few years before the 1929 stockmarket crash, the rout that is widely believed to have caused the Great Depression. The book counters that it was the bursting of the property boom in Florida which (due to its much wider pool of investors) ultimately brought down the economy. The words of an estate agent of the time has some worrying echoes of the time we live through right now:

“As to why the boom stopped, the answer is very simple. We ran out of suckers. That’s all. We got all their money, then started trading with ourselves…Did I saw we ran out of suckers? That isn’t quite correct. We became the suckers-standing down there at the foot of the class. Very simple. Very simple, indeed.”

Exponential: How Accelerating Technology Is Leaving Us Behind and What to Do About It, by Azeem Azhar (US) (UK):

Exponential: How Accelerating Technology Is Leaving Us Behind and What to Do About It by [Azeem Azhar]

Azhar’s book outlines why the constant feedback loop of technology, economics, politics and society makes stable predictions about the future so difficult. Exponential change is very difficult to spot, especially when it’s starting from a low base. But after a few periods in which doubling occurs the change is difficult to dismiss.

However, Azhar’s makes a powerful case for the existence of an exponential gap. This occurs when institutions and other elements of society (for example, education) are slow and cumbersome to recognise, and then respond to the change. This traps people in the linear mindset of the existing world order.

This book is an important piece of work to understand the underlying technological change, and at least being prepared for what it might mean. For example, from the perspective of commodity investors it will pay to be aware of the innovation that is happening right now to batteries, and what that might mean for the demand for lithium, and other battery materials.

The 10 Rules of Successful Nations (US) (UK):

The 10 Rules of Successful Nations by [Ruchir Sharma]

Ruchir Sharma was the head of emerging market at investment bank Morgan Stanley for 25 years. Ruchir is also the author of Breakout Nations, The Rise and Fall of Nations, and The 10 Rules of Successful Nations. In 2021 he left Morgan Stanly to focus on investment and writing opportunities.

His experience includes traveling to several countries to look for investment opportunities, gather data for research and meet different stakeholders. He typically spends one week every month in a different country, meeting with leading politicians and top CEOs. As Sharma himself states, “Reading Excel spreadsheets in the office can’t tell you for example, whether a political regime gets the connection between good economics and good politics.”

Sharma created a pioneering framework based on his travels, that can be used by any investor to identify markets most likely to under and over-perform in coming years. This framework was outlined in the third of his books, The 10 Rules of Successful Nations. To identify breakout nations it is key to travel with an eye toward understanding which economic and political forces are in play at the moment, and whether they point to growth, and at what speed, bearing in mind that they are in constant flux. This is a great resource for understanding why certain emerging markets perform well, while others do so badly.

Moneyland: Why Thieves And Crooks Now Rule The World And How To Take It Back, by Oliver Bullough (US) (UK):

Moneyland: Why Thieves And Crooks Now Rule The World And How To Take It Back by [Oliver Bullough]

The author carefully depicts how bankers in London discovered a hole in the Bretton Woods agreement enabling them to use dollars outside of the USA with authorities unable to track them. The ‘eurodollar’ market as it’s known was the genesis by which those with good and bad intentions could move money from one jurisdiction to another. Some may have been fleeing persecution, but many others were politicians and business leaders fleecing their countries and parking the cash out of sight from the authorities.

This book is an amazing insight into how financial innovations such as these have helped propagate inequality, pushing up property prices in London and other global cities, but at the same time locking people in less developed countries into a cycle of poor economic and health prospects.

The New Map: Energy, Climate, and the Clash of Nations, by Daniel Yergin (US) (UK):

The New Map: Energy, Climate, and the Clash of Nations by [Daniel Yergin]

This is the first book of Yergin’s that I’ve read. The two other books that people might be more familiar with are The Quest and The Prize. This book details the geopolitics of energy markets from a number of different perspectives – America, Russia, China and The Middle East.

Yergin then goes onto describe how the emerging technologies of the latest energy transition (EV’s, renewables, etc.) and other breakthrough’s, and how they might redraw the geopolitical maps of the future.

Winners Take All: The Elite Charade of Changing the World, by Anand Giridharadas (US) (UK):

Winners Take All: The Elite Charade of Changing the World by [Anand Giridharadas]

A superb depiction of the hypocrisy of the global elite trying to ‘save’ the world. Because the elite are in charge of social change projects, their initiatives naturally reflect their own biases – from Davos man fighting climate change in their private jets, to environmental NGO’s funded by the charitable foundations of big polluters.

As Giridharadas outlines, “Those at greatest risk of being resented in an age of inequality are thereby recast as our saviours from an age of inequality. Socially minded financiers at Goldman Sachs seek to change the world through “win-win” initiatives like “green bonds” and “impact investing”….Conferences and idea festivals sponsored by plutocrats and big business host panels on injustice and promote “thought leaders” who are willing to confine their thinking to improving lives within the faulty system rather than tackling the faults.”

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