When Markets Collide by Mohamed El-Erian

Thursday, December 17, 2009

Subtitle: Investment Strategies for the Age of Global Economic Change

As 2009 comes to a close and we prepare for the unknowns of 2010, it seems a just time to quickly summarize the current status of our global economy.

There is a global shift taking place from the traditional power centers - the U.S. and to a lesser degree Western Europe - towards heavily populated, emerging players. This shift, which would have taken place even without the near collapse of our financial system, is now intertwined with the decisions made to stave off disaster over the last year.

The United States acted as the motor for growth and consumption over the last fifty years. The American consumer has driven this consumption, especially over the last twenty years, through debt. We are all aware this can no longer occur and a shift towards savings and debt repayment means consumption will have to come from elsewhere. This U.S. led consumption has made an enormous impact on other countries as well. By importing more goods than it exported, the U.S. generated a large current account deficit resulting in the sending of vast sums of US dollars to the exporting countries. Oil producing nations have likewise accumulated hundreds of billions of dollars due to the exporting of oil to the U.S. and other rich world countries. Amassed with US dollars these countries through vehicles such as sovereign wealth fund, are seeking a home for their liquid dollar assets - from homes on the French Riviera to large stakes in Morgan Stanley.

As exporting nations have been producing goods for the U.S. at low cost, they have put ever more demand on natural resources (commodities). They have begun to see an upward pressure on wages as their local economies grow. Both of these factors, demand for commodities and increasing wages, will fuel inflation. Add on top of this the government spending in the rich world in the forms of various stimulus plans and inflationary concerns abound even though we are currently in a quasi-deflationary period.

Basic demographics are also changing with Europe's population getting older, the US being in between and countries such as Brazil possessing a rather young population. Governments will have to respond accordingly as they struggle to provide the services these population segments require. Demands for certain goods and services will become more relevant based on these shifts.

The above encapsulation of global economics is the context within which El-Erian, the world's largest bond investor, and former directer of Harvard's Endowment fund, frames this concise and relevant text. The majority of the book is spent setting the stage for what is to come and what has developed over the last few eventful years.

He then attempts to outline measures that can be taken to benefit from these shifts taking place. How as investors can we accumulate the wealth needed to support a prosperous future? And, equally as important, how can we counter balance our portfolios to prevent massive loss through huge downswings in markets or erosion of certain asset classes due to inflationary effects?

I am no longer in possession of the book so I can only recall what stayed with me since I read it over one month ago. This will have certainly been meshed together with my own beliefs. Perhaps this is a more useful exercise. Some points for investing in the future:

1. Develop a view of the global economy and dedicate a certain percentage of assets to the shifts you believe likely to occur. If inflation is a concern due to rising wages in Southeast Asia, commodities, real estate or inflation protected securities will be safer bets than cash or certain types of equities.

2. Watch out for "home bias". Investors have the tendency to buy stocks from their home country, especially in the U.S. but also in other countries as well. Active Swedish investors place 48% of their invested money in Swedish stocks even though Sweden makes up 1% of the global economy (Thaler & Sunstein, 2008). Investing in what you know makes sense up to a certain degree but does not warrant such a disproportional approach. This is equally true in the States where a robust and transparent equity market warrants a large percentage of investment focus but not the absurdly high percentages most Americans have in their home market.

3. Emerging Market Government Bonds can essentially be grouped with more traditional bond types as their government balance sheets are in healthier shape than many more traditional markets, e.g. Greece and Ireland.


The Prize by Daniel Yergin

Sunday, November 22, 2009

To claim The Prize to be a book on the history of oil already by such definition limits the impact this commodity has had on the development of society over the last 150 years. What it really is is an analysis of global economic and military history over this time period framed within the context of oil.

The book begins by concentrating on the historic period before World War I when Winston Churchill, as civilian head of the Royal Navy, began to see the importance of replacing the coal fired fleets of the British navy with those using oil in order to gain in speed and agility. Yergin chooses this as his starting point, even though he then moves back 60 years to the true founding, because this was an important turning point in how oil was used. It was at this time when oil became a "disruptive technology" as it moved from an energy source mainly used for providing light to one that would become the standard form of fuel for all transportation.

After this introduction, The Prize returns to its chronological unfolding using as the starting point a key series of scientific discoveries regarding oil's potential uses and then later to the first wave of major U.S. discoveries. Though oil's history can be dated back long before this, the foundation of oil as an industry and major fuel source has an American heritage. .

In 1859 the Drake Well in central Pennsylvania was hit thus sparking the first wave of oil mania. This mania brought all types of people from expert scientists and geologists to green thumb enthusiasts with nothing to lose. The creation of boom towns in desolate parts of the U.S. became common. These towns would quickly be erected often to satisfy the needs of the fortune seekers (booze and prostitution). Means for distributing the oil would be hastily devised with a very short term approach to get the black liquid to far off markets. Once the source showed signs of reduced volumes or a bigger source was discovered elsewhere, the towns would quickly find their streets and brothels empty. The comparisons between the boom towns and the massive cookie cutter neighborhoods erected in the last five years in the States during our latest housing boom are strikingly similar.

The next part of the book explores how the fragmented industry, from finding the oil to distributing it, paved the way for on opportunity of massive levels of consolidation and vertical integration. It was seized and later exploited mainly by one man - John Rockefeller of Standard Oil. Rockefeller bought other oil companies both large and small, keeping the efficient ones and merely closing down the others to limit any potential threat of competition. Standard Oil was the first true monopoly in the U.S., controlling 90% of the oil derivative, kerosene. Its dominance led way to growing discontent of the American public who lacked alternatives to Standard Oil products and became more aware of the incredible fortune being amassed by Rockefeller as a result. In 1911 the Supreme Court ruled that Standard Oil be split into 32 different regional companies who would then compete with each other for customers and markets.

World War I was a very labor intensive struggle fought and won in the trenches with limited reliance on machinery. World War II, as painted by Yergin, was a war in which oil played a decisive role in the outcome. Both Japan and Germany lacked domestic sources of oil and were therefore dependent on other countries, namely Romania and Indonesia, to provide the oil needed to power their ships, planes and tanks. The lack of this crucial resource and the failure in certain cases to effectively distribute it to the divisions in need led to losses at key junctures in World War II events . An interesting example is how German troops, led by the brilliant Rommel, were unable to seize control North Africa to the extent desired because at key battles they were without fuel needed to power their panzer tanks.

The U.S. and Russia were instead at a particular advantage because they could rely on domestic fuel sources. An agreement between the U.S. and the U.K. also meant Britain, whose North Sea source would not be found until decades later, was also able to receive its needed share of American oil. However, having access domestically is only one part needed for success. How you manage your operations is another. Yergin's description of a floating fuel station comprised of numerous ships and tankers that were able to provide fuel to other ship fleets in the South Pacific was fascinating. Though the author dedicated several chapters explaining why Japan and Germany were greatly hindered by their lack of oil, I found the book thin on other examples of Allied success.

The post-World War II era led to the rise of what Yergin defines as the "the Hydrocarbon man", i.e. the individual consumer who developed an ever growing thirst for oil. It also was the period of the oil producing dominance of the Middle East region. The book is probably at its strongest here. It brilliantly explains how the major oil companies established themselves with marketing (downstream) channels in the consuming countries and favorable partnerships with Middle Eastern countries. By providing technical expertise in this region they were given a disproportionately large share of the revenue generated from each new barrel. Later Yergin clearly explains how OPEC was born and the economic significance it played in the market - essentially by controlling two levers - setting supply levels as well as prices per barrel.

The 800-page book is referred to as "the Bible" of oil history. The magnitude of this industry in terms of global scale and historical importance over the last 150 years means that in order to effectively write one, all-encompassing volume a certain high level approach and style is necessary. Yergin succeeds in incorporating the macro level history and economic connections oil has played over this time period. However, by taking such an approach it is inevitable that some other aspects regarding such an important subject will be less adequately addressed.

I respect the focus Yergin took in writing the book and his unrelenting ability not to defer from it. However, there were two main faults I found in doing so. The impression he gave when discussing the "hydrocarbon man" and his insatiable thirst for oil was that the oil companies were passively responding to the demand for their product that was being begged for by consumers. However it was never discussed how this demand was stimulated to such excessive levels. What was lacking in the text was an adequate explanation as to why consumption levels grew at such astounding rates over these years. What were the relationships like between the auto manufactures and the oil companies? Certainly these industries were strongly connected to the centers of power in Washington D.C. yet was never mentioned.

Hydrocarbon man became dependent on the automobile due to lack of alternatives. The classic example of the removal of all tram lines in Los Angeles certainly encouraged such behavior yet it, nor any other relevant example was even eluded to. And why were such large vehicles in such demand? Yergin refers to the adaption of the first fuel economy standards in 1975 of 27.5 mile per gallon within 10 years as revolutionary step which led to a drastic reduction in oil consumption. Though the book was published in 1990, a few years prior to the SUV boom, it is hard for his praise of such regulation not to ring hollow considering the impressive gas mileage of the Ford Expeditions and other "light trucks" exempt from these standards. Such SUVs went on to make up 50% of all vehicle sales in the U.S. The automakers gained on the higher profit margins of these vehicles as well as special deprecation status they were granted for business purposes. Oil companies also make more money the more often consumers need to fill up their cars. Such a thrust by automakers towards these types of vehicles certainly pushed hydrocarbon man's demand for oil. These type of factors were absent in his book.

The focus of The Prize as a work of economic history also meant that the small time victims of such a massive industry were ignored. As someone who is far from an expert on the industry, I am still aware of tragic stories such as the one of Ken Saro-Wiwa's, who fought against Shell and the Nigerian government because of the environmental damage the oil drilling was causing in the Niger delta. A reference, at least collectively, to the victims of the oil industry as well as the environmental impact it has made was something due in the book yet was nowhere to be found.

Regardless, The Prize is required reading for those on all sides of the debate as it provides the foundation to what has become the lubricant of our daily lives.


L'eleganza del Riccio (The elegance of the Hedgehog) by Muriel Barbery

Sunday, September 27, 2009

Ah, France! This novel, with such French attitude, scoffs at the wealthy for their shallowness, as well as their unmerited sense of cultural superiority over the social classes below them. Barbery does this by focusing her story around two central characters: the door-woman of an elegant resident building in central Paris and the twelve year old daughter of one of the families living in the building. Both of these characters are made to be the most culturally and intellectually astute individuals in the novel, much more so than the barbarians that grace the floors of the building.

It would be easy to dismiss the stereotypes portrayed of French society as cliche', however, they are made so apparent throughout the novel that their blatancy somehow makes them comical. Instead, the subtler aspects of the book touch on more philosophical arguments regarding such subjects as art, beauty, the purpose of life, and human existence - shall we say the pain et beurre of French intellectual thought.

The story is simple and for this reason pleasurable. The door-woman, Ms. Michel, lives what at first glance appears to be a monotonous life, ignored by the inhabitants of the building. However, she finds comfort in this solitude and actually makes all efforts possible to draw as little attention to herself as possible. To do so she must hide all her intellectual pursuits as not to raise any questions in the eyes of the pseudo-intellects around her. However, they are probably too stupid to pick up on them anyway. When Ms. Michel is not reading Russian literature, she is hammering away at the shallow and miserable lives of the rich around her. There is a certain sense of irony here since the pursuits such as shopping, shampooing hair multiple times and wearing make-up are looked down upon by her that is until she catches the eye of a new resident to the building - Mr. Oke, a retired Japanese.

Mr. Oke, being someone truly steeped in culture and intellectual capacity is quickly able to see how the door-woman is not a typical type. He then begins inviting her to various activities much as Richard Gere did to Julia Roberts in Pretty Woman. The response of Ms. Michel is not much different in that those superficial activities of the wealthy become appealing as soon as someone comes along who is interested in her.

When compared to modern American novels, this book is more layered in that it offers a straightforward story of its characters but also dives deeper into more philosophical discussions. There are a lot of cultural references as well. What I see as being the major difference when compared to modern American novels is how Barberry writes to a more educated, cultured audience than most writers do in the States. As this book was the bestselling one in France over the last couple of years, we can assume therefore, that it was read by people of all socioeconomic backgrounds. Heaven help us if it had only remained in the upper echelons of French society!


Remix by Laurence Lessig

Wednesday, August 19, 2009

The subtitle is "making art and commerce thrive in the hybrid economy"

I do not want to start off this post by saying something cliche' like any working in ecommerce, new media, or Internet services should read this book though the temptation is there. Instead I will say that in my own line of work this book has already given me a new way to approach certain arguments and a new way to conceptualize how the Internet and its economic and sociological implications are developing at present time.

Remix is a comfortable, insightful and at times funny read. It is written by a Stanford law professor with a very strong background in Internet and commerce. He presents the book with simple language and clear examples which tend to favor a more business or political audience than one specialized in law.

The central argument of this book is that our copyright laws in the digital economy are outdated and ineffective - ineffective for both consumers of copyrighted content and the suppliers of it. It is a system that penalizes the small actors on stage but also complicates matters for big business who spend endless amounts of money policing those who abuse the current laws. There needs to be news ways to tax the revenue generated by the sale of artists' goods.

The copyright laws in place were developed in an analog world when sharing a record meant physically giving the copy to someone else thus taking the copy away from yourself. Later on with the advent of cassette, records and photocopy machines, it became possible to make lower quality copies of music or books while keeping the original. However, the situation has changed dramatically with digital technology. The "copy" has a new definition. Now an MP3 file copy is identical to the original. When a copy is made the original is not effected. The Internet and high-speed data networks make the dispersal of these copies simple and fast.

One argument that resonated with me is how outdated copyright laws are impeding the development of a new forms of culture and expression. The way users in the digital world paste a collage of photos, sample music or piece together multimedia presentations is something new that needs to be promoted as a new form of cultural expression. Copyright laws which make a DJ ask for permission to use a 10 second sample of someone else's music slowdown this development. Not only do they restrict the spawning of new culture they also punish these "aggregating artists" as well as other smaller businesses and entrepreneurs lacking the resources to battle the legal bureaucracy of copyright. It is essentially another way the US government is picking winners alla GM. Large record labels, for example, benefit at the expense of smaller players. By supporting these traditional, established players we risk missing out on the birth of new, unknown industries which would result from this cultural innovation.

Lessig's book was a bit thin on alternative ways artists could be properly paid for their work. One suggestion was to add a tax onto Internet access. This tax would then be divided among artists based on what percentage of the total volume of file sharing traffic their songs made up. However, the lack of alternatives does not hinder the book in my eyes.

What I appreciated most about Remix was how it attempted to address an issue we are facing now in modern society. It is a book for the business community that does not heap praise on past "heroes" but instead provides means to better conceptualize the digital economy and how it is developing before our eyes. It also reminds us of how such an economy is blurring the lines between business and society in a way that has not been seen for a long time.


Herzog by Saul Bellow

Sunday, August 9, 2009

"I think I can say, however, that I have been spared the chief ambiguity that afflicts intellectuals, and this is that civilized individuals hate and resent the civilization that makes there lives possible. What they love is an imaginary human situation invented by their own genius and which they believe is the only true and the only human reality." Saul Bellow

The above quote was taken from one of the hundreds of letters, never sent, that were written by the protagonist of this novel - Moses Herzog. Herzog's letters are rich with philosophical insight and show the depth with which Bellow was able to write.

However, the purpose of this post is to turn to the readers of my blog to ask their own interpretation of Herzog. The book centered on one character the entire time. We are provided access to his writings, conversations and thoughts. Yet, even with such insight I struggled to understand him and therefore could not fully appreciate the book. What was driving him? How enraged was he by the divorce with his wife? How did he view modern society? I am curious for answers to these questions. Fresh insight from others is always appreciated.


Separati in Patria (Seperated within the same Country) by Giovanni Floris

Saturday, July 18, 2009

Giovanni Floris, a journalist by trade, hosts one of the best weekly programs on Italian television. The format of Ballarò is just varied enough not to bore the viewer. The majority of the transmission is centered around five or six guests, made up mostly of politicians but also professors, business leaders, and journalists arguing with each other in typical Italian fashion. It is Floris' role to weave together the questions, responses and debates into something cohesive. He does a fine job. There are interludes in the arguing in the form of 5-10 minute investigative journalism pieces put together from various locations in Italy.

Seeing how Floris often has little occasion to state his own opinions, I was curious to read his recently published book on one of the most significant issues affecting Italy, the enormous economic differences between the north and south of the country. The subject is of personal interest to me for several reasons, one being that a large part of my undergraduate thesis was dedicated to the Southern Italy's economic difficulties. And like most things in Italy, it is not an easy matter to unwind due to the economic, sociological and historic factors all at play. The largest failure of Floris' book is that he touches on each of these fields but fails to sufficiently address any of them.

The first part of the book looks at the socioeconomic statistical differences between northern and central Italy compared to the South. For starters, removing Southern Italy, the GDP per capita of the country would be higher than Germany, UK, France or Spain. The vast majority of business leaders and politicians at the national level come from the North. Residents in the North read more books than those South and supposedly speak more Italian and less local dialect - though I missed any figures supporting this claim. It appeared to me that his main thesis was built on the belief that the differences between the regions of Italy are strictly economic and less cultural as many people are likely to believe.

One example which proved to be most interesting in supporting his central thesis was the favorable benefits five autonomous regions - regione a statuto speciale (Sicilia, Sardegna, Valle d'Aosta, Trentino-Alto Adige and Friuli-Venezia Giulia) received, i.e. money. While the island regions of Sicilia and Sardegna are part of the south, the remaining three are located in the north. These three regions receive more money from the state than they delve out in taxes. Other northern regions instead are left fitting the bill, receiving or spending much less than what they generate in tax revenues and seeing enormous amounts of capital flow south as well to these smaller, northern regions. It was not clear to me Floris' position on the matter. Certainly their are cultural idiosyncrasies in these special regions, for example the majority of residents in Trentino-Alto Adige speak German as their mother tongue. However, Italy in itself is made up of very local cultural entities. Is Floris claiming that these regions play up the cultural distinctiveness in order to protect the economic benefits they receive? Though the example was a fascinating one, I missed his message.

Another point Floris touches on, though briefly, is that the northern regions are in a geographically favorable position as they are much closer to other, rich, European markets. Though Floris did not mention it, it is important to see how on the other hand many parts of Southern Italy are closer in distance to countries such as Croatia, Tunisia, Albania, and Libya - not exactly enormous consumers of foreign goods and services - than they are to Milan.

What was lacking was a discussion on more of the geographic and climatic aspects present that greatly favor the north. If only Floris had seen my thesis paper! The land in the north is much more fertile compared to the south. Anyone who has seen The Passion of Christ (filmed in Matera) or remembers the scenes of a young Al Pacino in The Godfather walking through the arid country side, can recognize it to be a difficult place to grow stuff. Also, it is simply more difficult to work in hot weather.

These points are not meant to serve as excuses for southern Italy's inability to improve its condition. All indicators for me see the situation deteriorating. The infrastructure is far below average European levels. Investing in the region is risky (and costly) which makes the decision to put a new factory in Croatia as opposed to Puglia a more sensible decision. This same argument also loosely applies to tourism, an area which should be one of the foundations of the the southern Italian economy. However, without a clearly defined strategy for this industry most parts of the south are left in a dangerous middle position. Unable to compete on cost with other sunny destinations such as Egypt or Turkey and lacking the infrastructure to support a more high class type of tourist, an area with incredible food, beaches and people sees the majority of tourism from other European countries go elsewhere.

As the length of this post continues to grow, it becomes apparent the difficulty an author has when writing about such a broad subject. Focus too much on one field and you find yourself in a silo ignoring other equally important factors. Attempt to touch on all of them and leave the reader with more questions than answers as interesting arguments are raised only to be quickly hurried through to get at the long list yet to be addressed. Floris chose the second approach and was not successful in putting together a well-structured and well-argued book.


Couples by John Updike

Monday, July 13, 2009

The characters in Couples sure do drink a lot - cocktails, often gin based. Though gin came from the UK, I consider it to be the red, white and blue of spirits. Even though the main focus of this wonderful novel centered on adultery, I was more intrigued by the role alcohol played in American life from post World War II up until today.

I have the impression so much of the dionystic fury during the booming post-war decades was fueled by booze: the 5 pm cocktail on the porch, the late summer neighborhood BBQ kicked off with martinis , or the boat drinks while idling on some vessel in the harbor. The cocktail in se represents this period of iconic bliss which is not as prevalent now as it was before. Though the consumptions of spirits is certainly something better done without, I do see a small reflection of our society in the splinters of ice floating atop of stub glass.

was written in 1968, long before I was even born. Yet, it still brought back memories of my own childhood spent in the late summer months on the East Coast.

The story is based on a series of families living in a small community south of Boston. These young, educated couples spend incredible amounts of time entertaining each other with dinner, drinking, and pick-up basketball games that then lead into beers then dinner and more drinking. The stresses of long commutes, grueling travel schedules, or duel working parents, did not seem to be too relevant in these carefree times. Instead, the majority of the characters mental resources were dedicated to plotting their next extramarital affair. The detail and description of these sexual encounters is risque at times, hilarious at others.

The setting in the small town above the long beaches of the Atlantic accompanied my own sand filled vacation very nicely.


Cathedral by Raymond Carver

Sunday, July 12, 2009

The stories in Cathedral are longer compared to those in the previous two collections. I am not the first to say it, but after having read through a series of Carver's works, one can see the development he made as a writer. There were many Carver readers who saw signs in Cathedral of something larger than a short story ready to come out if we had not lost this great American writer at such an early age.

After having read through several dozen stories, I was eager to settle down with a more substantial piece of literature. John Updike's Couples proved to be exactly the type of novel which I was in need of.


The Partnership - The Making of Goldman Sachs by Charles D. Ellis

Tuesday, June 23, 2009

There are two facets of our global economy which have an enormous impact on all levels of society - financial markets and oil. Both of these industries have experienced massive growth over the last half century that their impact has already played a role in shaping modern history. It is therefore important that I feel comfortable with my own understanding of these subjects even though it can be a tough go at times to read such material. There are plenty of other books I would prefer to be leisurely enjoying on my freetime.

The Partnership is a book about the history of Goldman Sachs - arguably the most successful investment bank in the market. Its rise from a modest American bank into a global superpower of finance is one of the greatest expressions of US-styled capitalism ever witnessed. It will forever make up a part of business history. Even more, several of its CEOs and partners have gone onto important public positions, thus meaning that GS' reach has effects on the political sphere as well.

Even in this time of resentment towards investment banks, there are certain positive traits that Goldman Sachs deserves to be commended for. Its belief in meritocracy, team results, and absence of politicking is commendable. There are lessons to be learned for any business manager in areas such as goal setting for employees, recruiting and running effective meetings.

To fully appreciate the book does require a certain level of financial understanding. I have a basic understanding of the subject and at times struggled to grasp certain concepts being discussed. This leads to another point: what level of understanding is required before you are justifiably allowed to bash the banking sector? Certainly there are plenty (millions) of people who, after having read a handful of articles on the industry since the crisis came into full swing, feel their insights are worthy of getting them on the short list for the Nobel Prize in economics.

I have read several books on the industry, taken a few courses and follow financial papers with regularity and I still do not feel adequate discussing the topic. However, I will make a small observation regarding The Partnership, which was published in 2008 before the crack of Lehman Brothers. Would Ellis have written this book in such a glowing light if he were publishing it in 2009? His praise for the firm rings much more hollow now after seeing how the events in finance have unfolded. Throughout the book he painted a picture of an institution that had made next to no mistakes. The last chapter was written just when first signs of the sub-prime crisis was emerging and he made it look as if Goldman Sachs had if anything profited from the situation. We now know this not to be true.

Goldman Sachs had to convert itself to a holding company so it could gain eligibility to the Federal Reserves emergency lending facilities. Yes, Goldman Sachs has already paid back the US government for lending it received but it did need government assistance to stave off collapse. Adding these points to an additional chapter would have not been enough for this book. It would really require a complete reexamination of the superior, worshiping tone that permeates throughout every page.

Goodbye Germany! For the next few weeks I will be heading to the sunny shores of Italy. In terms of the upcoming summer reads that will be making the journey with me are Bellow"s "Herzog" and Updike's "Couples". I look forward to writing about them when I am back.


What we Talk About When we Talk about Love by Raymond Carver

Sunday, June 14, 2009

This post is really a continuation of my previous one on Raymond Carver

I have not read many short stories in my time. After now having completed the second collection by Carver I am beginning to appreciate the skill involved in delivering messages about the characters using very little text. A full length novel has the luxury of being able to develop characters over time, and often still does not succeed. How do you, therefore, accomplish it in seven pages? Perhaps "developing" the character is not even the right term. How do you give glimpses of insight into the characters that allow you to, even momentarily, understand them? I am finding Carver's writing to rely on the logical thinking of his readers. Each sentence has a purpose in his writing and he leaves it up to us to determine their significance based on our own interpretation.

There are two stories that stayed with me the most. The first one is titled "Viewfinder". It is about a man with no hands who takes photographs of peoples houses and then sells them to the owners. He visits one house where the owner offers him coffee not necessarily because of his hospitable nature but instead due to a nagging curiosity to see how a man with two hooks for hands would hold the cup.

The second has the same title as the book itself. It is essentially a discussion between two couples about love. Their openness to elaborate on the more intimate aspects of their relationships is greatly aided by two bottles of gin. The conversation is good, honest and disturbing.


Will you Please be Quiet, Please? by Raymond Carver

Saturday, June 6, 2009

I do not exactly recall how I first came across Slavoj Zizek. I believe it was in my search for contemporary philosophers who discuss the events of modern society at a deeper level than journalism is able to do. A few online pieces of his work proved to be rather interesting, especially his fascination in film and the underlying messages it often conveys. So, I was happy to see an interview with him in the Financial Times a few months after my initial introduction. The interview jumps from the financial crisis to Marxism and even includes a brief anecdote on the movie, Titanic. However, it was one reference he made to the film, Short Cuts that caught my attention. He claimed it be a Hollywood film which deserves to be called "art" compared to many "fake" European films. This stuck with me namely because I remember as an early teen looking at the VHS case of Short Cuts at my local Blockbuster. It was a blue case with little cut outs of all the different actors in the movie. I never did rent it, most likely opting for True Lies instead.

Nearly 15 years after having first seen it dawning the wall of the New Release section at Blockbuster, I finally sat down to watch Short Cuts. It did not disappoint. As an American living abroad now for several years, I am becoming more and more curious about my native country. I find myself constantly in search of those cultural works which best describe the true essence of the U.S. This serves two purposes. The first is that it allows me to have a portfolio of recommendations for those individuals who actually show a curiosity in better understanding the U.S. and its people beyond the stereotypes often conveyed by our own pop culture. I have not come across many interested takers yet but I am ready when it does happen. The second is simply because I relate to these albums, books, or films more now than when I am living in America. I appreciate them more, mainly due to nostalgia. Returning to Short Cuts it depicts the real life of normal people living in the more mundane neighborhoods of Los Angeles and confronts the difficulties they face in their day-to-day lives.

The film was based on the short stories of Raymond Carver. The director, Robert Altman, took a dozen of Carver's stories and weaved them together. The Criterion Collection of this film included a documentary on Carver. Thus my introduction to Carver began here with the first scene being of his widow reading one of his poems above his gravestone in Port Angeles. I only discovered he was buried there after the fact. However, I only needed to see the evergreens in the background running up to the cliffs edge above a large body of water to know that she was in the Pacific Northwest. Such an interesting string of connections served as the sign to me that the author's works deserved reading.

Will you Please be Quiet, Please? is Carver's first collection of short stories. He lived his entire life on the West Coast and this comes through in the stories. I found myself relating with his words. I have two more collections of his short stories to read and will describe in my future posts those that I enjoyed the most. In the meantime, go and rent Short Cuts. It is certainly no longer in the New Release section of Blockbuster, especially the one on N.E. 8th in Bellevue which closed down two years ago. Actually, the action "go and rent" isn't really valid any more either. It can be substituted with "go to 'Your Favorites' folder on your browser, left click, Search on Netflix 'Short Cuts', left click three times".

15 years is a long time.


The Ambassadors by Henry James

Sunday, May 17, 2009

I often found myself calling out to my junior year high school English teacher while reading The Ambassadors. I can only describe this undertaking as a literary journey in its purest form and frankly it was not one I was prepared to make on my own. Ms Tramontine would have certainly provided the explanations needed to fully appreciate some of the finest uses of the English language I have ever come across.

The journey was the same as one would experience in its more traditional definition with moments of frustration and confusion later disregarded after witnessing glimpses of sheer beauty - in this case a result of a series of sentences written with such fluidity that left me smiling and then rereading the prose out loud.

I have since read a handful of literary reviews on this work that James claimed to be his best. One theme emerging more than once is how it is a difficult book to break into initially. I concur, succeeding only to do so in the last one hundred pages.

The story in itself, is simple in nature especially when comparing it to modern fiction which is constantly being required to push the creative envelope. A young American in the early 20th century is having too much fun in Paris. His concerned mother sends her fiancée to convince the son to return to the States to take over their successful business. However, upon arrival the fiancée is overcome with the beauty and splendor of Paris and its gens. He meets the son and his friends who he finds to be fabulous in all senses. Several different women play vital roles throughout the story yet the book is free of sex and expressions of hedonism. Yet, James' greatest ability is how he enhances the tensions in these relationships using the subtle aspects of human nature often not written about - the longer than usual glance, the words not spoken in that moment.

I do want to read this book again as there is bound to be so much more to be gotten from it. If anyone in my vast blog audience would like to join me on this journey please let me know. I cannot offer to be the guide, per se, but perhaps the role of the scout could be a more realistic and suiting one.


Se Questo è un Uomo (If This is a Man) by Primo Levi

Friday, May 1, 2009

Primo Levi was an Italian Jew who fought against the fascists during the second the World War. He was captured at the age of twenty five and sent to Auschwitz for one year from 1944-1945. Educated as a chemist, he went on to write what is probably the most highly regarded account by an Italian of life in the concentration camps. He went on to become a successful journalist until his suicide in 1987, 42 years after having survived Auschwitz. After having read his simple and honest recount it becomes more understandable how such an experience cannot be forgotten in one lifetime. The memories still haunted him four decades later.

My own childhood education gave a fair amount of attention to World War II and in particular to the stories of Holocaust survivors. However, it had been fifteen years since I had read a personal account of this nature. It is important for all of us to do for the simple reason that it reminds us how fortunate we are.

It is my impression that pop culture with its happy endings, perfectly manufactured characters, and material excess often has the reverse effect than that which is intended. I often hear the justification to be how people need something light, easy, and happy that allows them to relax after a stressful day. Therefore, watching your standard formula Hollywood film or flipping through Maxim are accepted means for overcoming the difficulties of the day-to-day grind. But what often is happens is that society is instead presented with a reality that does not exist and worse yet, leaves them desiring something unattainable. You cannot have rock hard abs in just six weeks.

A book of this nature, instead, pulls at such a vast range of emotions. One cannot read it without feeling a reoccurring sadness and anger. Yet, for me, the positive aspects were greater. I understood the true strength of the human spirit - capable of overcoming the unimaginable. I was able to see how true individualism without the help of others does not exist. It was impossible to survive a lager without the partnership of at least one other person.

On a more superficial level, the winter at its coldest is something I will no longer be able to complain about when I have a warm down coat and a heated house. Winter for those in a concentration camp meant working 12 hour days in wooden shoes, a cotton shirt and a canvas jacket with temperatures at -20 degree.

Stories such as this allow us to better content ourselves with what we have instead of subliminally pointing out our physical imperfections or small bank account. Finding this self-contentment is a truly relaxing experience which is more likely to be found in a difficult book than in season four of Desperate Housewives.


Bowling Alone by Robert Putnam

Tuesday, March 31, 2009

After having finished Hope against Hope which spoke of the condition of Russia in 1930's, I decided to swing in the opposite direction with the next book. In this case, Bowling Alone maps the sociological progression of the American community after World War II by examining the external relationships that Americans have with one and another. In 1930's Russia, no clubs, teams, or organizations could exist except one - the State. On the opposite end of the spectrum is the USA, where people are given the full freedom to take part in any community-based organization that exists. And, if one does not exist, we are entitled to create our own. This freedom of social involvement is one of the most crucial aspects of a vibrant democracy. Unfortunately, it has been in consistent decline since the late 1960's. Putnam attempts to seek out why this is the case and what can be done about.

The first part of the book introduces an important theme running through America. There are more clubs and organizations now than there ever were in the preceding decades. How then can one say that club memberships are down? What Putnam shows is how the dynamics of membership in these clubs are different. Today, there are all types of clubs imaginable. Organizations like Greenpeace, the NRA, or the Sierra Club have millions of members. However, the vast majority of these members will never actually come together to discuss a new approach to recycling or the caliber of their assault rifle. Instead they will rely on these organizations to act as lobbies mainly for political purposes. It is the other type of clubs that Putnam says are at risk: local Kiwanis, Boy Scouts, and Knights of Columbus.

Why have these organizations seen their memberships decline? Putnam plows through piles of data in search for the answer. However, like much in life, there is never just one justification. Instead, he identifies a few key contributors, which come as no surprise. Longer commutes, television viewing, duel income households and a generations shift, e.g. Americans in the 1940s were united by World War II. All of this leads to a reduction in social capital, which along side human and physical capital are crucial components of a successful society.

People that interact with others often are happier, more civic and less likely to commit crimes than those who are isolated. The communities in which social interconnectedness is strong, is a better, safer place to live than a less connected society. And, what I found to be most interesting is that encouraging certain aspects of social capital will lead to positive effects in what, at first glance, would seem not related.

For example, North Carolina scores 41st in the nation on SAT scores in High school while Connecticut scores 8th. According to Putnam, "by controlling for all the other ways in which the two states differ (wealth and poverty, race, adult education, and so on), for North Carolina to see education outcomes similar to Connecticut's, according to our statistical analysis, residents in the Tar Heel state could do any of the following: increase their turnout in presidential elections by 50%; double their frequency of club meeting attendance, triple the number of non-profits per thousand residents." As he goes on to explain, these factors above have a greater effect on test scores than many traditional, and often costly, education policies such as reducing class room size. Social capital is more difficult to measure but its presence in our lives cannot be ignored when attempting to tackle many of the problems facing our schools, inner cities, or entire states.

The question that I kept waiting to be answered is - so what do we do now? It never really was. I have a hard time believing the findings of this book came as a huge surprise back in 2000 when it was written. Has the situation improved since then? Have the I-pod or Facebook done more to worsen the situation? Has September 11th brought us together like World War II did in to previous generations?

On an even more philisophocial level, are these devices and trends simply a reflection of our society and the direction in which we want to go? Is it wrong if we find more satisfaction in isolating ourselves from others than in meeting with others? I, personally, believe it is. However, more importantly, my human instincts often act as my guide pushing me towards interaction with others. For me it is the best guide. However, I am not burdened by many of the damaging factors Putnam atributes to the reduction of our social interaction, namely a grueling commute or excessive TV watching. Eliminating these two factors would certainly open a new world up to hundreds of millions of people throughout the world. It seems like a good start could be to put down the remote. Let's start there.


Hope Against Hope by Nadezhda Mandelstam

Saturday, March 21, 2009

One of the reasons I decided to write this blog was to become a more critical reader. Now as I read a book, I begin to formulate the arguments that are then discussed on this page. My most recent read proved to be a difficult text on a few different levels and as I type these words I am still unsure how to encapsulate the subject matter. Therefore, I now understand why George Steiner of the New Yorker is quoted as saying, "nothing one can say will either communicate or effect the genius of this book. To pass judgment on it is almost insolence-even judgment that is merely celebration and homage." I was not able to fully grasp the genius of this memoir written about Russia in the 1930's but I can relate in the difficulty of actually passing judgment on the work.

A dear friend of mine with a deep knowledge of communism has always told me that Marx's political ideology was never meant for a country like Russia. Certainly the Bolshevik Revolution in 1917 led way to a complete transformation of a society at all levels - from economic to cultural. However the tactics used by Stalin to "pacify" society for the betterment of all led to a nation gripped by fear who saw millions of its citizens sent to the forced labor camps to die.

Within this period any type of expression deemed disruptive to the state was not tolerated. Those involved risked death. The intellectuals who supplied cultural material to the country did so either in a state-sponsored position or underground. The first approach meant that all poems, books and music were subject to government approval while the latter meant living a transitory life with no security, money, or assistance. Many of these individuals were seen as a nemesis to the state and were arrested and sent to camps.

Hope Against Hope could be the best and most humanistic account we have of what life was like during that period for someone who opposed the state. It is the memoir written by the wife of Oris Mandelstam - one of Russia's most famous poets. These two individuals spent their entire marriage on the run mainly due to one poem Mandelstam wrote which included two negative lines about Stalin. A poem! Arrest! What absurdity.

Our history of Russia and the will of man are both richer thanks to this book. Having access to this period cannot be taken for granted because so many millions of pages of text, be it poems, biographies or novels, never made it beyond the eyes of the secret police who confiscated and later destroyed them. The fact that this memoir survived is a miracle in its own right.


Ghost Wars by Steve Toll

Saturday, February 14, 2009

History is fascinating because of its continuous progression through time. Events that have already taken place will combine themselves with events yet to occur. This combination will create future outcomes that will then be discussed and written about as history. Three major, international events are unfolding before our eyes without any foreseeable end in sight. Their story is yet to be completed, their history not yet ready to be declared. The link which connects Iraq, Afghanistan and the financial crisis is how each are in some form a consequence of how the United States has managed itself and viewed the world after the collapse of the Soviet Union.

So much of our past has up until now been condensed into historic episodes - The Great Depression, World War II, Vietnam & 1968, The Cold War. How will the episode we are currently living through be later defined? What overarching conclusions, yet to be drawn, will weave these three events together? These are questions I have been asking myself with greater regularity.

I have found it interesting to see Ronald Reagan's name emerging with greater frequency in the international media when discussing the Financial crisis. An icon of fiscal conservatives, his disdain for government involvement in the market has within the last year been called into question like never before. From a military and foreign policy perspective we have seen how those from the Reagan school, i.e. Rumsfeld, Cheney, Wolfowitz, struggled to see the world through a Post-Cold War lens when orchestrating their military strategies in the Middle East. This school had viewed the world up until 1989 in terms of good and evil. As a result, it was easier to mount a military and propaganda-based war against a single, devilish individual than it was to understand and make understood the country of Afghanistan. Once again, September 11, 2001 was carried out by the Al-Qaeda members located at camps in Afghanistan. Iraq had no involvement in it.

"Ghost Wars - The Secret History of the CIA, Afghanistan and Bin Laden, from the Soviet Invasion to September 10, 2001", will certainly be consulted for years to come as an essential read for those seeking a historic context behind September 11th. The book is laid out in a perfect chronological sequence. It does an excellent job of tying in the numerous individuals who in some way played a significant role in the developments of Afghanistan over the last 30 years. And it does so by adequately introducing the individuals, something that was not accomplished in the book, Paris 1919, for example.

To summarize Afghanistan from the US perspective, the CIA was heavily involved in the country as it was battling the Soviets in the early 1980's. Unable to conquer this incredibly difficult country, the USSR withdrew which led to a decline in US interest in the region. From that point up until September 2001, the US did not take a position on the country due to several complicated relationships it had in place with Pakistani and Saudi intelligence as well as one particular warlord in Northern Afghanistan.

The U.S. was well aware of Bin Laden's presence in the country. Its failure to capture him can be hailed as a truly bi-partisan effort. Clinton was too often bogged down with his own personal issues and with different poorly timed election campaigns. The eight months Bush was in office prior to September 11th, showed a cabinet wide lack of interest in terrorism and Bin Laden even though the CIA was ringing the alarm bells months before the attacks.

However, in the end, Ghost Wars proves that blame cannot be placed on one person. September 11th was a result of a series of mistakes and several instances of bad luck which accumulated over two decades to finally detonate with the attacks on the Twin Towers and Pentagon. the book also hints that "the system" in place regarding international law on such issues as assassination, had been constructed before the rules of war were turned on their head with the introduction of a new, more deadly form of international terrorism.

I fully recommend this book and strongly urge people to read it especially considering the critical juncture we find ourselves at in the start of 2009 with a new president. Obama will be forced to make the decision whether to drastically increase the troop presence, and therefore causalities, or to withdraw from the country all together as the Soviets did thirty years ago. Our current approach is simply not working.


The Meaning of Everything by Simon Winchester

Tuesday, January 27, 2009

The Story of the Oxford Dictionary

In modern day and age it is difficult to conceptualize what it means to undertake a project so massive in scale that the person leading it will most likely not live long enough to see its completion. Where do you derive your motivation from when you are aware that the satisfaction of conclusion will probably not be experienced? Yet, it is in these life-devoting undertakings that many of our worldly treasures came to be. While the current global economy is paying dearly for its overfixation on short term results, it is worth reflecting back on the marvels in history that took years, decades, or centuries to complete. The thirteen week business quarter is such a short period of time that many of these accomplishments certainly did not even show any physical change over 91 days. Now careers are ended and projects scrapped if tangible results cannot be demonstrated in this timeframe.

Michaelangelo worked four years on the Sistine Chapel which is equivalent to about an afternoon's worth of time when compared to the seventy years required to assemble the Oxford English dictionary (OED). This dictionary has little in common with the pocket Webster II crammed into many modern home libraries. The objective of this dictionary was to give definition to all words used in the English language and to reference the previous uses of each word. This required a level of research of the endless number of potential texts that is difficult to comprehend as it reached from New Zealand to the United States. A project of this nature demanded collaboration across oceans imaginable in modern times with email and phone, less so at the turn of the 20th century. To further complicate matters, many of the dictionaries most essential collaborators were volunteers whose only connection to the OED was their passion for reading and interest in the project.

Winchester's account of this story is average overall, fascinating in certain places. We are introduced to several interesting characters whose efforts made up the impressive piece of human achievement today called the OED. To become editor of the OED required a certain type of individual, to say the least. A love for the English language was important but not adequate, mainly because our language derives from so many continental European influences. English represents a combination of these languages in many ways and therefore the editors of the OED were fluent in over ten.

So, what is the outcome of this work? It is a masterpiece that documents our complete language. Since its release in 1928 there has been one new edition with several supplements for the new words appearing in the modern form of our language. The third edition is one quarter complete. The OED is currently celebrating its 80th birthday with a commemorative edition of this twenty volume masterpiece. The offer expires in four days - price for the set? $895. Too bad we just missed Christmas.


Nudge by R. Thaler and C.R. Sunstein

Sunday, January 11, 2009

UPDATE: Sunstein has become the "legal czar" for the Obama administration.

Access to nearly endless choice is one of the defining elements of the capitalist world we live in, unless you are one of my North Korean or Cuban followers. Allow any firm the ability to offer their goods or services to the market. Those with the strongest offering will find success, while those not able sell their goods and make a profit will, in their own right, cease to exist. GM not included.

The premise of this book deals with how human beings make decisions in response to these choices and how they can be "nudged" into doing so as to better benefit themselves. For economists all decisions are rational while in reality we know this is not the case. Human instincts are very strong and are weighed down by various biases which prevent a rational decision making process.

A trip to the supermarket confirms that companies are well aware of this irrational decision making and they take all the steps to "nudge" you towards their product by paying more for eye-level shelf space, wafting the smell of baking bread throughout the store, and placing milk at the back of the store.

The gist of the book is built around the following - the placement of a certain, more expensive, yogurt may convince me to buy one I normally would not, but I have hundreds of future opportunities to correct this poorly made decision. However, certain decisions regarding investments, retirement plans, health care, and university are drastically limited. So much so that many of these decisions will be made perhaps only one time in your life. Better not screw it up, to say it mildly. Yet, just like the yogurts in the supermarket, the number of healthcare or pension plans has become endless. How do we nudge people to make the best decision regarding these important long term subjects?

One example of how to nudge effectively without restricting choice is by selecting, well-researched and balanced default options for people while always allowing them the choice to select a plan for themselves. With Medicare, this would mean by default that a selection of prescription medicine plans for the elderly would be made from one of the 60 available plans based on previous prescription records of the recipient. This seams logical enough. In reality, when the overhaul of Medicare took place in 2003, the default option for prescriptions medicine plans was in most cases "non-enrollment" or "random selection". To further complicate matters, the process for selecting the plan (from 60 of them!) was not very clear for various reasons explained in the book.

This is an entertaining and insightful read. It demonstrates how, namely, government and its associated bodies can direct the majority of its citizens, from school lunchrooms to organ donations, to mutually beneficial outcomes without imposing sweeping regulation.


The Eagle and the Fried Chicken by Vittorio Zucconi

Wednesday, January 7, 2009

I enjoy Zucconi the journalist, who acts as the US correspondent for La Reppublica newspaper in Italy. Perhaps the enormous letdown of this book was amplified even more because I had expected much more from this author. I guess I will continue to read Zucconi's articles but not his books.


A Man without a Country by Kurt Vonnegut

Sunday, January 4, 2009

Supposedly, Vonnegut broke a promise he made never to publish another book when he put together a series of ramblings and published it shortly before his death in 2008. The book is far from a success, considering the reputation of the author that I have developed over the years even though I have never, until now, read one of his books. However, it does serve as an interesting starting point for me - beginning with the last work of an author. He talks mainly about his own life. What he had to say was intriguing. There was just not enough of it.

At one point he briefly discusses socialism in the USA and his own Socialist leanings. After a lifetime in America I can assume that even Vonnegut began to develop an appreciation of the free market considering he compiled a few writings into a book which can be read in an afternoon and sold it for $23.95. He must have known that his fan base was large and loyal enough to pay to get their hands on his last insights.


Paris 1919 by Margaret MacMillan

The title of this book refers to the six month period after World War I, when all the countries involved in the war, and many who were not, descended on Paris to negotiate the peace treaty, later to be known as the Treaty of Versailles. The three central figures shown on the book cover were Woodrow Wilson (USA), Lloyd George (UK), and Clemenceau (France). Vittorio Orlando (Italy) rounded out the "Big Four" but he and his country acted more like the little, whiny stepbrother that the older brother and his two buddies had to invite to along in order to play 2 on 2. These three central characters had an enormous task, which was bound not to succeed 100% due to the endless numbers of variables involved in the negotiation.

The three themes most present in the negotiations were borders, ethnicity and reparations, with the first two often being related. What became clearer while reading this book is how before the Great War the modern day definition of borders did not exist. This was mainly a result of colonization outside Europe and the size of the Austria-Hungarian Empire (AHE) inside of it. After the fall of the AHE, Europe found itself with certain ethnic groups scattered throughout the continent who before had lived under the umbrella of the empire. Such examples included Germans in Romania and Italians in Croatia. Defining the borders and determining where these ethic groups should live was an impossible task, especially in Yugoslavia. The repercussions were still being witnessed in the Balkan War 80 years after.

How to handle the reparations was the other critical issue to be resolved during the six months in Paris namely by determining how much money Germany needed to pay the UK and France. Demand too much and the German economy would become crippled, too little and they would rise to power again too quickly. The overarching question was how the Big Four, through reparations and new border alignments could ensure Germany became strong but not dominant. History confirms that an outright answer in 1919 was not readily available.

The majority of the chapters in Paris 1919 are written about each individual country involved in the negotiations. The sections on Greece and Turkey were particularly fascinating. Others, such as the tension in China and Japan, seemed out of place. I say this because the reader is led to believe that the majority of the focus will be centered around the three main figures (just look at the cover) and how they would negotiate with Germany. I was left without a true feeling of what was driving these three individuals. Equally, the sections on Germany were not much more in depth than those on the rise of Ataturk in Turkey. The conclusion focused entirely on Germany, while the book was truly international in its scope. This is understandable considering the events which would follow twenty years later. However, the "German question" did not come across as the outright, central theme of the book as the conclusion leads the reader to believe.


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