Siegel’s review by Sebastian Mallaby History of enterprise capital sums up the essence of this business with a single biting line: “They are all unreasonable, non-conformist people who get on your nerves.” This also has investment relevance.
In his interpretation of Brad DeLong’s novel: “Everyone was born into a world in which the basic ingredients of a decent life have already been invented. We should reflect on our incredible good fortune so we don’t squander it.” Elsewhere he reminds us, quoting Roger Ibbotson: “Finance seems extraordinarily complicated, but when you simplify it to its essence, two prices are required: the price of risk and the price of time.” Kevin Coldiron adds the sequel: “Without positive real interest rates there can be no capital. Without capital there can be no capitalism.”
The diagrams and tables are also value a glance. A graphic on page 38 shows how global GDP rose like a rocket around 1800. Others show when pollution began to say no, how fertility patterns reversed, and the way industry developed over two centuries of U.S. capitalism. It’s like a visible refresher on economic history – without the teachings.
Siegel never loses sight of his audience. He explains why any book or idea is very important to investment professionals: “Investors must be acutely aware of the sources and barriers to innovation in their search for potential returns.” Looking back at McAfee, he notes, “Some companies and industries will be hurt while others will be helped tremendously. Actively managed portfolios can benefit from this insight.”
From his emphasis: “Most decision makers – pension managers, advisors and portfolio managers – are unaware of the tendency of mean-variance optimization to increase the errors of input assumptions.” A mild and useful reminder.
Siegel is just not a cheerleader. He praises generously, but doesn’t skimp on criticism. In his opinion, McAfee’s book is a few narrow aspect of technological advancement, dematerialization, and readers searching for a broader perspective should try McAfee’s earlier co-written book. About DeLong’s book: “He believes his restructuring proposal is liberal, but it is deeply reactionary and throws sand into the gears of mobility and ambition.” On the boundaries of the market to supply happiness: “That’s because it’s not supposed to be that way! The market is an economic system, not (tempo Ayn Rand) a moral one.”
To say that Siegel’s reviews are a pithy substitute for the books themselves can be unfair – to the books. Still, readers searching for sharp, in-depth insights into a few of a very powerful ideas shaping economics and investing will find an entertaining education of their very own. Some astute readers will little question return to lots of the chapters throughout their careers.
