Book Bits: 13 July 2024

● Shocks, Crises, and False Alarms: How to Assess True Macroeconomic Risk
Philipp Carlsson-Szlezak and Paul Swartz
Excerpt via Harvard Business Review
In 2022, when U.S. interest rates climbed, a cascade of emerging-market defaults were predicted—but they didn’t materialize. Also in 2022, and again in 2023, public discourse cast an imminent recession as “inevitable.” Instead a resilient U.S. economy not only defied the doomsayers but delivered strong growth.
For executives and investors such whiplash comes with two types of costs: financial and organizational. Consider the financial cost to automakers that reduced their semiconductor orders in 2020 because they misread the Covid-19 recession as a protracted economic depression. That meant they missed out on sales during the roaring recovery. And leaders can lose the trust of their organizations if they overreact to false alarms with abrupt reversals in strategy, operations, and communications. Clearly, getting the macro call right really matters.

● The Afterlife of Data: What Happens to Your Information When You Die and Why You Should Care
Carl Öhman
Review via The Economist
Unlike bodies, data do not decay. According to Carl Ohman, a Swedish political scientist, this condition makes the modern world “post-mortal”. “The dead remain there for us in a way that has not been possible in pre-digital society,” he observes. As a result, “Living in the post-mortal condition is to constantly find oneself in the shoes of Max Brod.”
The digital era has reshaped humans’ relationship with the dead—as anyone whose Facebook account has reminded them to say “happy birthday” to a late family member can attest. That sort of reminder would probably never have happened before social media, because everyone who knew that person’s birthday also would have known that he was dead. Such reminders are poised to grow more common: Mr Ohman’s research has found that, on Facebook, the dead may well outnumber the living within 40 years.

● Siliconned: How the tech industry solves fake problems, hoards idle workers, and makes doomed bets with other people’s money
Emmanuel Maggiori
Essay by author via his website
As we discussed in another post, venture capital firms manage pots of money, called funds, which they invest in start-ups. They charge a high fee for this service (a total of $15 million to manage a $100-million fund over the years, for example). The fee is charged regardless of the success of their investments. This has led some people to believe that VCs focus a lot on raising more and more funds and not so much on making good investments.
In 2012, the Kauffman Foundation, an American non-profit organization, decided to analyze its past twenty years of investing in VC funds as a limited partner, or LP, meaning that it paid money into the fund without managing it. The foundation published a worrying result: The VC funds in which they invested tended to report to them an exceedingly high performance during the first two years. That coincided with the period during which their managers were trying to raise a new fund (VC firms raise new funds every 2.5 years on average). After the first two years passed, the reported performance dropped dramatically and remained low

● Capitalism Created the Climate Crisis and Capitalism Will Solve It: The Market Forces Catalyzing a Climate Technology Renaissance
Kentaro Kawamori
Summary via publisher (Wiley)
In Capitalism Created the Climate Crisis and Capitalism Will Solve It: The Market Forces Catalyzing a Climate Technology Renaissance, distinguished author Kentaro Kawamori delivers a fascinating and timely exploration of the interplay between capitalism and climate change. He explains how the capitalist system helped to contribute to the current crisis of global warming and how that same system will help to end it. In the book, the author discusses the enormous impact of the climate crisis and how the government, the modern finance industry, the fossil fuel industry, and others combined to accelerate the warming of the world. He then considers the roles those same players will play to reverse this effect in the coming years.

● The Predictive Edge: Outsmart the Market using Generative AI and ChatGPT in Financial Forecasting
Alejandro Lopez-Lira
Summary via publisher (Wiley)
In The Predictive Edge: Outsmart the Market Using Generative AI and ChatGPT in Financial Forecasting, renowned AI and finance researcher Dr. Alejandro Lopez-Lira delivers an engaging and insightful new take on how to use large language models (LLMs) like ChatGPT to find new investment opportunities and make better trading decisions. In the book, you’ll learn how to interpret the outputs of LLMs to craft sounder trading strategies and incorporate market sentiment into your analyses of individual securities.

● Inside the Black Box: A Simple Guide to Systematic Investing–2nd ed.
Rishi K. Narang
Summary via publisher (Wiley)
In the newly revised third edition of Inside the Black Box: A Simple Guide to Systematic Investing, veteran practitioner and investor Rishi K Narang delivers another insightful discussion of how quantitative and algorithmic trading strategies work in non-mathematical terms. As with prior editions, this third edition is full of timeless concepts and timely updates. Supplemented by compelling anecdotes and real-world stories, the book explains the most relevant developments in the discipline since the publication of the second edition in 2013.

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