Three Cups of Tea tells the supposedly true story of Greg Mortenson and the Central Asia Institute (CAI) building schools in Pakistan while on a rip-roaring adventure of Taliban kidnappings amongst other tales. I received it as a present and enjoyed the moving story.

Except that, as it turns out, much of the story is stretched, elaborated and in parts completely concocted.  Jon Krakauer writes, in Three Cups of Deceit, how the seemingly sociopathic Greg Mortenson not only fabricated key parts of the story (and in contradiction of earlier, published articles by his own hand) but also ran the organisation for personal gain.

It’s definitely worth a read, even if it is a little sad to realise that a hero is actually a charlatan.

A point many of Mortenson’s supporters make is that he still did good – he and his CAI did build schools, did educate children and did raise awareness of society building as key methods of improving living standards and understanding in troubled parts of the world.

The problem I have there is that many people who donate money to charities, NGOs and similar programmes will donate the money to a cause anyway. Therefore, a significant portion of  funds that went to the CAI would have gone to other causes if it weren’t for Mortenson’s lies.  Moreover, that money wouldn’t have been squandered on Mortenson, on promoting his book, or on the now-empty schools built in the wrong places without equipment or teachers.

Mortenson redirected money away from good, solid causes and into his own pocket.

It’s chock-full of analysis, numbers, tables and charts showing how as much as things change, the scope for financial crises changes very little.  The comparison of Developed and Emerging Markets is particularly interesting in that the differences, while they do exist, are far smaller than stereotypical views.  Emerging Markets do tend to have more ongoing sovereign defaults, but the frequency of banking crises is little different. Weirdly, some aspects of Emerging Market crises (such as employment impacts) are less than average for the Developed World.

It isn’t really the book’s fault, but this was one of the few books that I struggled with on my kindle – the graphs and charts and captions to figures were particularly difficult to read. Perhaps they would look better on the Kindle DX (the larger model) or even an iPad or something.

Although the book doesn’t focus on the current (still-happening, if you weren’t paying attention) financial crisis, there are several chapters dedicated to it with an analysis of the economic indicators leading up to the crash. Now it’s incredibly easy to predict an event after it’s happened, but I’m still hopeful that the results can be useful in predicting future problems and potentially impacting economic policies and regulations for the better.

Some key conclusions from the book for predictors of financial crises:

• markedly raising asset prices (yes, and in particular house prices given the likely co-factor of increases in debt levels)
• slowing real economic activity
• large current account deficits
• sustained debt build-ups (public and/or private)
• large and sustained capital inflows to a country
• financial sector liberalisation or innovation

That last point was particularly interesting for me – for all the statements that the US economy’s brilliant use of innovation and reduced regulations being a risk mitigant, history suggests this as a cause for the crisis.

For me, what was quite worrying is how well South Africa matches many of these points in the 2000s.  It seems that we either got off very lightly, or there is still an extended period of difficulty ahead.

After banking crises, house prices typically decline in real terms by 35.5% and this slump lasts on average 6 years. Now South Africa didn’t have a bank failure, so it may be that we missed the definition of “banking crisis”. However, given the pullback in credit offered along with international banking crises and property market declines, this suggests we’re in for an extended period of property market stagnation.

Why Purple Cow? Because it’s extreme, it cuts through the oversaturated marketing and product appeals, which Seth describes as required to have an impact in the current competitive environment.

Light reading, thought-provoking and a great conversation piece, it’s a worthwhile read for those in marketing (who should probably have already read it by now) or anyone involved with growing a business again hordes of competitors. I read it a few chapters at a time, which I recommend as a way to absorb the ideas and ponder them before moving on to the next points.

Definitely worth reading.

The jargon that Lewis uses is generally explained and shouldn’t prevent non finance geeks from understanding the role of subprime lenders, mortgage originators and, of course, the Wall Street banks that fed the frenzy with CDSs, synthetic CDOs and bonuses for all.

The story places a few characters at the centre of the story. I wasn’t convinced that these guys were all skill and no luck, but they certainly seemed to have a clearer idea of what was going on in the murky, muddy waters of securitisations of that era than many of the supposed experts.

Overall, it’s won’t be the smash hit that Liar’s Poker is, but it’s entertaining reading all the time. The links to Gutfreund are tenuous and smell a little of name-dropping. If Lewis wanted to remind the reader of his role in toppling the ex CEO of Salomon Brothers he succeeded. If he wanted to somehow project the glory onto the new book, he failed.

The Big Short at Amazon.co.uk

The Big Short at Kalahari.net

Check out Book Finder for prices from several stores (new and used) in your currency including delivery costs to your location.

We are expected to take almost everything as given and accepted, with almost no time spent showing, explaining or proving why these ideas work. Add to that some standard business analysis models reworded and renamed, but giving no better (or worse) insight than the original models makes me wonder what the point of reading the book is.

Mr Sunter would have done well to have a editor with a little more backbone who could counter this weak effort and ask him to try again.

The general themes of critical thinking, caution and recognising complexity rather than being taken in by simplistic, post hoc, naive, flawed logic reasons for high performance are important. Authors from Tom Peters to Jim Collins have made a fortune, and entertained thousands, with their books on how to improve organisational performance. However, from the admission that much of the data for “In Search of Excellence” was fabricated to small samples and failed long-term predictive ability out of “Good to Great” the answers are imperfect.

The world of behavioural economics has discovered much about exactly how badly we typically think, especially when we don’t realise we should be in “logical analytical mode”. So much so that the book is now old news.

I don’t know whether the author is so impressed with his own ideas that he imagines the need to spell them out in excruciating detail with multiples too much evidence to allow mere mortal readers to understand, or whether the typical reader is so unfamiliar with the requirements of critical thinking that a ten page pamphlet needed to be expanded to several hundred pages. Maybe the publishers paid per word?

If you need convincing that much of what we are taught about success and the few or single simple drivers of it are, the book might be worthwhile as a tome of evidence. If you require a simple memory aid, there is none better than the 1917 quote of Mencken, “There is always an easy solution to every human problem–neat,
plausible, and wrong.”

Typos and grammatical errors are widespread. Seriously, get a decent editor and proofreader.

A key message from the book is that lending is not risk-free as some proponents of Islamic finance purport. Restricting interest-based lending means many transactions simply won’t take place. Somehow, the author misses the extension of this message when he recommends a cap on interest charged to prevent usury – nowhere does he consider that this will similarly restrict lending to high risk borrowers since at times higher interest rates are required to reflect the risk.

Overall, a good read, most importantly for those who have not yet understood the flaws of the adolescent Islamic finance industry

The book details the history of the Democratic Republic of the Congo from its pre-Stanley (yes, that Stanley) days before east African Muslim traders were replaced by European explorers through to the eventual downfall of Mobuto Sese Seko and the arrival of Laurent Kabila in the mid-90s.

The “Congo Free State” became the personal possession of King Leopold II of Belgium, the only monarch to actually own a colony. Even against the backdrop of typical colonial abuses, it seems King Leopold was a particularly nasty character, taking his Belgian subjects along for the ride even as he pillaged the depths of Africa.

As the Belgians rapidly give into an independent Congo, the story turns to Mobuto Sese Seko, the pragmatic politician who seems to be a Great Black Hope to keep the Congo together and recognise its obvious potential. Hope quickly fades to concern as resources are directed towards personal use by Mobuto to retain power and build lavish palaces. Utter lack of economic understanding and a short-term approach to problem solving that seems predicated on not allowing the creation of real infrastructure, economy, institutions or power other than his own foreshadow the spiral into utter failure. Bizarrely, the horror at the damage caused by one of the most infamous African leaders) falls away slightly to pity as Wrong paints a picture of a sickly, powerless and leadership-paralysed old man incapable of escaping the future corner he painted himself into.

The power of the book is the phases of understanding and emotion that the reader goes through as the story unfolds. Key messages of institutionalised corruption and the long-term damages of colonialism (much as Apartheid’s ills are still playing out in South Africa’s  psyche, economy and society) mingle into a sense of profound pessimism for the future of Africa.

More than read it, anyone looking to understand and invest in Africa must absorb the book’s pages into their bodies and incorporate the stories and histories in their decision making process.

It seems that the Chinese may not have read the book carefully enough. Perhaps they are prepared to roll the dice  and take their chances. The Atlantic (a US magazine dating back to the 19th century) has great coverage of the Chinese path towards a new empire in Africa.

The Atlantic article makes several references to Chinese plans to redirect the flow of minerals (and hence economic control and prosperity) away from South Africa. I wonder how well South Africa’s leaders are prepared to play this decades-long strategic game with the Chinese?

But more than that, I wonder whether the Chinese will leave Africa better or worse than they found it. Africa’s track record suggests one should prepare for another round of use, abuse and discard.

How The Mighty Fall

Jim Collins set out to write an article on how successful companies fail. For some reason, probably commercial, he decided to turn it into a short book.

He should have stuck with the article idea.

While the ideas presented are certainly interesting, there is nowhere near enough material to justify R290. Almost half the book is “appendices” covering, very weakly, some of the victims of the financial crisis and providing background data and information that gave rise to the conclusions reached.

I usually quite like the idea of having all the information available so the conclusions don’t have to be taken on blind faith. I just don’t see why these couldn’t be provided for free on the web or something.

I was also very disappointed to not see a greater distinction drawn between failure of large, geared financial services firms that take on too much, poorly understood risk and other enterprises with very different reasons for failure. I’m starting to doubt how much Jim Collins even knows about financial services firms and what led to the recent troubles!

Read it for sure, but read it quickly and make sure you’re reading a borrowed copy from some mug like me who actually paid full-book-price for a long article.

It’s fair to say the South African taxi industry isn’t besotted with the Bus Rapid Transport (BRT) system. It’s understandable too. No matter what assurances are provided around newly jobless taxi drivers being placed within BRT, the reality is that a more efficient service with larger vehicles will need fewer drivers.

It’s also blindingly obvious that a more efficient, safer and better controlled public transport system is overwhelmingly to the advantage of pretty much every other citizen in our wonderful country.

A small group (often termed a Special Interest Group) lobbies (politically or through protests or violence) for a change (or the maintenance of the status quo) to their advantage at the expense of the wider population. Taxi owners and drivers have their livelihood at stake. Of course they care disproportionately compared to the rest of us!

The Tea Party

The Boston Tea Party is commonly interpreted as an inspirational story of the colonists of the New World growing tired of economic exploitation and the famous “No taxation without representation”.

Of course this is not the true story.

It is true that the British East India Company was THE monopoly of the time and pushed hard for its profits. It’s also true that the British constitution of the day stated that citizens could be taxed only through consent of their representatives in Parliament. There was no directly elected official representing the colonists, so arguments about taxation without representation are probably fair. (As an aside, although there is no specific document called the “constitution” the rules and principles that make up a de facto constitution exist.)

The reality is that tea shipped to the americas, and imported through official channels, was taxed. This tax had been in place for several years and did not change around 1773 when these events took place. It’s also instrumental to note that historians have estimated the amount of team consumed by colonists and the amount taxed during the same period. Only 5% of tea consumed was imported through official channels so the tax  levied was almost irrelevant for colonists.

However, what did change, was that the East India Company (EIC) was allowed to sell tea directly to colonists rather than being forced to use local merchants as intermediaries. The EIC had a large surplus of tea that it needed to sell, and would have provided large quantities of tea at low price to the colonists.

More tea at a low price would have been a good thing for the colonists, given their voracious appetite for the dried leaves. However, the small special interest group of the local merchants who previously made a good profit out of reselling the tea were rather more put out.

It was these merchants who stoked support for the “no taxation without representation” catchy slogan of the day. They stood to lose and focused their energy on fixing the problem. The benefit that hundreds of thousands of colonists and settlers would have experienced through lower prices was somehow  forgotten.

But not forgotten by all. Reports at the time show that there were some who wrote that it seemed a small group would benefit and uncovered rather less honourable motivations. History doesn’t remember them as well.

I owe my understanding of these events to the fantastic book, “A Splendid Exchange – How Trade Shaped The World” by William Bernstein. If you enjoyed this, please buy his book at amazon.com or amazon.co.uk or your regular bookstore.

The Tax and the Tea Party and unbalanced interests

Those with a special, intense, personal or focused interest in legislation or policy will act disproportionately to enact their desired outcome. We need strong leaders to focus on the needs of the entire country to balance the manipulation of special interests and public apathy.