A meditation on trust in finance. Yes, you read that correctly.

I have been wondering about the role of trust in modern finance. To judge by the academic literature and the dominant rules and formulas, it has no role whatsoever. I find that paradoxical, to say the least, because trust is inseparable from participating in modern society. Everyday we make judgments, including economic and financial ones, based primarily if not exclusively on trust, as opposed to a calculation of odds, risks and rewards, costs and benefits. Academics refer to these daily challenges as exercises in “decision making under conditions of uncertainty.” Modern finance tries (and has failed) to quantify that decision-making …

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Leading from the middle: The NBN interview with John Roy Price

History is told, it is said, by the victors. And so it is in regard to Richard Nixon. We all know how his presidency ended. What too few of us recall or bother to learn is how it started. In his new The Last Liberal Republican: An Insider’s Perspective on Nixon’s Surprising Social Policy (UP of Kansas, 2021), John Roy Price details how in Nixon’s first few years in office, the President ardently tried to lead from the middle to eradicate the widespread poverty that had so characterized his own upbringing. It is a view of Nixon and a big-tent, policy-driven Republican Party that …

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How big is your platform? or “What color is your parachute?” 50 years later.

I recently got this very positive email mail through a professional social media platform: “:) .. your web site is treasure of great insights – I’m in my year two of my MBA journey and more and more I found myself checking historical and geopolitical “whereabouts” when reading the cases the profs. thrown on us .. I think it’s a/THE key  to fully understand what is happening “behind the scenes” of all/most they want us to do (evaluate equities or M&A deals, making recommendations, etc. etc. ) unfortunately it’s mostly omitted…” I was touched. The thing is, nobody goes to …

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It’s time to retire “Left” and “Right”.

George Orwell’s famous 1946 essay, “Politics and the English Language,” lamented how ideologues were wreaking havoc not only on their societies, but also on the language of politics itself.  He condemned the “staleness of imagery” and the “lack of precision” in the political writing of his day.  During the past 75 years, little has changed. The labels and personalities may be different, but the abuse on and by words is much the same. We can all agree that the United States has become politically polarized, especially so in the past half-dozen years. In better times, Yeat’s middle translated into a …

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The power of narrative economics….

A recent New Yorker article by Charles Duhigg ties together nicely several threads of emerging finance that are worthy of notice. The first is the power of narrative economics (and finance) championed by Robert Shiller. My review of his 2019 book by that name appeared on the New Books Network. Shiller’s argument stands in stark contrast to the orthodox model of classical economics. The second is that investment bubbles of the type we are now seeing with SPACs can and have in the past left behind substantial technological and financial innovation after the bubble has burst and much money lost. …

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NBN Interview with Louis Nelson

Louis Nelson’s Mosaic: War, Monument, Mystery weaves together a personal memoir, a history of the Korean War and its aftermath, and the tale of how the Korean War Veterans Memorial in Washington DC came to be. The result is a fascinating portrait of one of the late 20th century’s most important designers. Listen to the New Books Network interview here.

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A thoughtful and optimistic rebuttal to my post on Russian political culture.

A friend responded to my post of April 22….. “One thing I was concerned about with your essay is that some readers might walk away with the impression that Russia hasn’t really changed and won’t change.  I’m not even sure that’s what you intended to say.  There are clearly many Russians who would like things to change—and a number who are quite content with how they are.  There is also a certain type of non-Russian client I’ve had before who like to take they view that Russia is fundamentally different and incapable of being more liberal—and then use this as …

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Using the great 19th century realist novels to bridge what divides us….

Two very thoughtful oddfellows–a labor economist and a Russian literature scholar–take on the world’s problems in their newest collaboration, Minds Wide Shut How the New Fundamentalisms Divide Us (Princeton University Press, 2021). Gary Saul Morson and Morton Schapiro bring to bear the remarkably powerful tool of great 19th century Realist literature (and other parts of the Western canon) to define and counter the all-or-nothing fundamentalisms that have come to divide us in recent years. They touch upon politics, religion and economics, as well as great literature itself, and advocate bridging the divides with assertion and dialogue rather than the crude dismissal of opponents based upon absolute, unyielding …

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Russia & the West, again…..

Making the same mistake repeatedly and expecting a different outcome is a popular definition of insanity.  Can the condition apply to an entire professional group? In the most recent issue of Kritika: Explorations in Russian and Eurasion History, I highlight how many prominent US thinkers about Russia have maintained a naivete in regard to Russia’s ultimate political development for much of the past 70 years. Even during the height of the Cold War, leading members of the US establishment assumed that Russia would ultimately adopt classical liberalism and join the Western community of nations as a fully paid-up member.  It …

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Nav@1ny is a master of modern media, but does it matter?

February 2, 2021 update: It’s not the crime, but the cover up… That’s what they said about Richard Nixon’s downfall. Other similar episodes abound.  Given events in Russia over the past two weeks, one might assert a new corollary:  It’s not the corruption, but the crackdown.  A new allegation of corruption, even one on an unprecedented scale, was unlikely to move Russia. But the government’s excessive response and its treatment of the man behind the video has led to a popular reaction that the video itself did not. When is a show of government force actually a sign of great …

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It’s time for a new Centrist party in the spirit and practice of classical liberalism.

The good news is that the Grifter has left the White House. His closest aides and high-profile abettors are scurrying away to avoid the infamy that they so richly deserve. The newly installed President is clearly a moderate fellow, empathetic and conciliatory. And, ironically, he is so old that he can have no other agenda than to fix the current situation. His Vice President is the embodiment of the American dream. While the country remains in severe national security peril during this period of transition, one of the worst political crises in our nation’s history appears to be behind us. …

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Price discovery, Soviet Russia, and artistry

The elevator pitch to a book editor and movie producer that never happened: “the early 1960s Soviet experiment of loosening price controls would make for a great work of historical fiction and a high-end movie drama.”  No one in their right mind, right? And yet, it did. Francis Spufford’s Red Plenty came out in 2010. It is simply the best Western work of historical fiction about the post-war Soviet period. Spufford is not a trained Soviet specialist, but every professional historian of the Soviet Union secretly (and not so secretly) wants to have written that book. I know of what …

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How different are financial and political “bubbles”? And what ends them?

Depending on your perspective on certain “excited”  areas of the market and “extremes” in the political spectrum, we are currently engaged in a real-time exercise regarding what catalysts bring an end to these phenomena. Are the catalysts to end those historical moments different? By day, I have to think about the former; by night, I ponder the latter. And we know the role that social media plays in both of these realms. It’s worth recalling that for one of the past extreme moments, the reign of terror led by Joseph McCarthy, the social media of the day played a key …

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At the intersection of the Random Book Project & lockdown: War & Peace.

#6: Leo Tolstoy, War & Peace, in two volumes. (Leningrad: Lenizdat, 1984, originally published in 1865). Marked 3 rubles, 70 kopeeks, but with a Beriozka sticker indicating 5.55.  Exchange rate at the time was $1.26 per 1.00 ruble so the set cost $7.00 How did I get it? Bought it when I spent a semester in Moscow my junior year in 1984. Others went to London or Florence.  For reasons that still elude me, I went to the Soviet Union. Who does that? Why? While the book is timeless, my copy of it is not. The mass produced, acid-paper Soviet …

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Floating above history….

Nearly forty years after encountering The Education of Henry Adams in a college classroom, I was recently treated to a summary as to why the work was and remains so fascinating.  Dan Chiasson’s New Yorker review reminds readers of how Adams floated over history as much as he lived in it and wrote about it. Adam’s wonder at the new technology at the turn of the 20th century is as fresh today as when it was written over a century ago.

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Markets are everywhere, even where they are strictly forbidden….

Markets are everywhere, including where they strictly forbidden. This excellent research by Jim Heinzen on the Soviet second economy just came out in Slavic Review. The full article is behind a paywall but should be accessible via universities and libraries.  Link is here. Below is the abstract from the Slavic Review site. Soviet Entrepreneurs in the Late Socialist Shadow Economy: The Case of the Kyrgyz Affair James Heinzen Supported by new archival material, this article delves deeply into one landmark criminal case to explore key aspects of the social, economic, and cultural history of illegal production and markets in the …

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What if we counted differently……

Saijel Kishan’s recent Bloomberg article, provocatively titled, How Wrong was Milton Friedman is intriguing on many levels. It summarizes the work of George Serafeim, an HBS professor who wants to change how we measure company success and failure. Specifically, he wants to reward and punish companies on the income statement based on ESG impacts. That is, he proposes to put a dollar value on diversity or lack thereof, on polluting or not, etc. And then have those companies report profit and loss after consideration of their social impact. It’s an ambitious plan, and some would say just a natural extension …

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NBN Interview with Vadim Shneyder: Russia’s Capitalist Realism

Vadim Shneyder’s new book, Russia’s Capitalist Realism: Tolstoy, Dostoevsky, and Chekhov (Northwestern, 2020) examines how the literary tradition that produced the great works of Leo Tolstoy, Fyodor Dostoevsky, and Anton Chekhov responded to the dangers and possibilities posed by Russia’s industrial revolution. During Russia’s first tumultuous transition to capitalism, social problems became issues of literary form for writers trying to make sense of economic change. The new environments created by industry, such as giant factories and mills, demanded some kind of response from writers but defied all existing forms of language. Prepare yourself for an innovative perspective on Anna Karenina, The Idiot and other 19th-century …

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At the intersection of the Random Book Project and our current predicament.

#5: Guido de Ruggiero, The History of European Liberalism (Boston: Beacon Press, 1961, reprint of OUP original from 1927). No price. How did I get it: Been carrying it around with me since graduate school. Why: Rereading this classic account of “the experiment” in classical liberalism, to remind me how we got here, and how easy it is/would be to foul it up, and end “the experiment.”  De Ruggiero’s work was published as a rebuff to the fascism which had taken over Italy at the time. Relevant conclusion: classical liberalism cannot be assumed. It has to be worked at by each …

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NBN Interview with Jonathan Schneer: The Lockhart Plot

History in the making can be messy. As a tale told years later by historians, it is usually a clean narrative, with a beginning, a middle, and a mostly logical and foreordained end. Much of that messiness gets lost. Not in Jonathan Schneer’s new book, The Lockhart Plot: Love Betrayal, Assassination and Counter-Revolution in Lenin’s Russia (Oxford UP, 2020). Schneer’s recounts the story of a young British diplomat, Bruce Lockhart, sent to Soviet Russia soon after the October Revolution in 1917. Initially seeking some sort of accommodation with the Bolsheviks, Lockhart ends up plotting to overthrow the regime. The plot–set for …

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NBN Finance Interview with Tom Levenson: Money for Nothing

Modern finance isn’t really all that modern. Three centuries ago, Great Britain’s need for money to fight its wars, the appearance of joint stock companies, and the emerging quantification of all aspects of life converged to create new notions and forms of money and investments. And then there was a spectacular bubble in 1720. The South Sea stock rose and fell quickly, but the financing structures remained and last to this day in evolved form. In his new book Money for Nothing: The Scientists, Fraudsters, and Corrupt Politicians Who Reinvented Money, Panicked a Nation, and Made the World Rich (Random House, …

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NBN Interview with Gene Ludwig: The Vanishing American Dream

Gene Ludwig cares. The former banker, government regulator, and serial entrepreneur cares deeply about the hollowing out of the American middle class over the past several decades, not least of all in his hometown of York, PA. So he gathered the country’s best and brightest in 2019 for a conference at Yale Law School to come up with specific policy proposals that can reverse that process. The details of what has happened make for difficult but necessary reading. In The Vanishing American Dream: A Frank Look at the Economic Realities Facing Middle- and Lower-Income Americans, (Disruption Books) the policy proposals to rebuild …

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The 2020 election in historical context.

Heading into our presidential election, it is worth reminding the electorate how unusual our circumstances are. I am not referring to the country’s extreme political division and dysfunction, but instead to our framework of classical liberalism where individuals matter so much in a system of governance that they are actually asked to vote on the leadership of the country. From a historical perspective, that is an extremely rare approach to the management of complex societies. But to many of us, it does not seem abnormal at all. In fact, our system of representative democracy within a legal and financial system …

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NBN Interview with Joshua Greenberg: Bank Notes and Shinplasters

What is money? Really, what is money? It turns out that the answer is not so simple. During the course of the 20th century, most of us have gotten used to the notion of a single medium of exchange based on Federal Reserve notes which we call dollars. They look the same, feel the same, and have the same use everywhere in the country. We are so comfortable with that medium of exchange that we are now increasingly doing away with the paper and accepting a digital version of said money. The convenience of having a single and stable currency …

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NBN Interview with James Pearce: The weaponization of history in Russia.

History matters in Russia. It really matters, so much so that the state has a “historical policy” to help legitimize itself and support its policy agenda. In The Use of History in Putin’s Russia (Vernon Press, 2020), James C. Pearce examines how the past is perceived in contemporary Russia and analyses the ways in which the Russian state uses history to create a broad social consensus and forge a national identity. Listen to the NBN interview here.

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Random Book Project #4: Men’s clothier staging

Saw these three books as staging in the window of a men’s clothing store that declared bankruptcy this week. Store founded in 1818; think sheep. These books had been de-accessioned once, which is how they got into the window. Because this store is in the downtown business district and therefore likely to close permanently, these books will probably be tossed.   Gamle Pybus appears to be a Danish translation of the 1928 novel Old Pybus by English writer G. Warwick Deeping (1877-1950).  Pictures from the Life: Paul Gerhardt, an 1881 English-language translation of the 1845 biography of the 17th century German …

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Random Book Project #3: The Sinews of American Commerce (1941)

#3: Roy A. Foulke, The Sinews of American Commerce (New York: Dun & Bradstreet, Inc., 1941). No price. How did I get it: The book was recently given to me as a housegift by someone who knows that my proclivities run in this direction. Why: The book is classic deaccessioning material. It is a commissioned history to celebrate the 100th anniversary of Dun & Bradstreet, a business information and credit research founded in 1841. Published in August 1941, just before the outbreak of direct US involvement in World War II, the book is a testament to a muscular, unapologetic capitalism …

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