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Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kim, Renée A. Mauborgne
Asian financial crisis, borderless world, call centre, cloud computing, commoditize, creative destruction, disruptive innovation, endogenous growth, haute couture, index fund, information asymmetry, interchangeable parts, job satisfaction, Joseph Schumpeter, Kickstarter, knowledge economy, market fundamentalism, NetJets, Network effects, RAND corporation, Skype, telemarketer, The Wealth of Nations by Adam Smith, There's no reason for any individual to have a computer in his home - Ken Olsen, Thomas Kuhn: the structure of scientific revolutions, Vanguard fund, zero-sum game
For example, whereas a flight from Washington, DC, to Sacramento would take on average 10.5 hours using commercial airlines, it is only 5.2 hours on a NetJets aircraft; from Palm Springs to Cabo San Lucas takes on average 6 hours commercial, and only 2.1 hours via NetJets. NetJets offers substantial cost savings in total travel time. Perhaps most appealing, your jet is always available with only four hours’ notice. If a jet is not available, NetJets will charter one for you. Last but not least, NetJets dramatically reduces issues related to security threats and offers clients customized in-flight service, such as having your favorite food and beverages ready for you when you board. By offering the best of commercial travel and private jets and eliminating and reducing everything else, NetJets opened up a multibillion-dollar blue ocean wherein customers get the convenience and speed of a private jet with a low fixed cost and the lower variable cost of first-and business-class commercial airline travel (see figure 3-1).
Often, however, the space between alternative industries provides opportunities for value innovation. Consider NetJets, which created the blue ocean of fractional jet ownership. In less than twenty years since its inception, NetJets grew larger than many airlines, with more than five hundred aircraft, operating more than two hundred fifty thousand flights to more than one hundred forty countries. Today those numbers are even higher, with a fleet of over seven hundred aircraft, flying to over one hundred seventy countries. Purchased by Berkshire Hathaway in 1998, NetJets is a multibillion-dollar business with the largest private jet fleet in the world. NetJets’ success has been attributed to its flexibility, shortened travel time, hassle-free travel experience, increased reliability, and strategic pricing. The reality is that NetJets reconstructed market boundaries to create this blue ocean by looking across alternative industries.
The reality is that NetJets reconstructed market boundaries to create this blue ocean by looking across alternative industries. The most lucrative mass of customers in the aviation industry is corporate travelers. NetJets looked at the existing alternatives and found that when business travelers want to fly, they have two principal choices. On the one hand, a company’s executives can fly business class or first class on a commercial airline. On the other hand, a company can purchase its own aircraft to serve its corporate travel needs. The strategic question is, Why would corporations choose one alternative industry over another? By focusing on the key factors that lead corporations to trade across alternatives and eliminating or reducing everything else, NetJets created its blue ocean strategy. Consider this: Why do corporations choose to use commercial airlines for their corporate travel?
Who Needs the Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank by John Tamny
Airbnb, bank run, Bernie Madoff, bitcoin, Bretton Woods, buy and hold, Carmen Reinhart, corporate raider, correlation does not imply causation, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, Donald Trump, Downton Abbey, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, Home mortgage interest deduction, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, liquidity trap, Mark Zuckerberg, market bubble, money market fund, moral hazard, mortgage tax deduction, NetJets, offshore financial centre, oil shock, peak oil, Peter Thiel, price stability, profit motive, quantitative easing, race to the bottom, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Steve Jobs, The Wealth of Nations by Adam Smith, too big to fail, Travis Kalanick, Uber for X, War on Poverty, yield curve
There are others with claims on the same plane, and they also have guaranteed access to it on short notice. This raises an obvious question: What happens if there’s a run on a specific NetJets plane? NetJets has more than seven hundred planes in its fleet and keeps adding to that number. If the jet partially owned by a customer is in use, the NetJets rule is they offer their customers another aircraft that is the same or similar to the one the customer partially owns, or, for that matter, a larger one in their fleet that’s not being used. What if there’s a rush on all the planes in the NetJets’ fleet at the same time? If so, just as hotels have overflow deals with other local hotels, so can NetJets access private air transportation outside its fleet for its well-heeled customer base. It’s neither the only owner of high-end aircraft nor the sole fractional-ownership jet company.
It’s neither the only owner of high-end aircraft nor the sole fractional-ownership jet company. What needs to be stressed is that despite multiple-person ownership of its planes, NetJets isn’t multiplying them. Even though NetJets has many multiples of seven hundred plane owners with guaranteed access at quick notice to the roughly seven hundred planes it its fleet, NetJets is not playing a trick on its customers. Without presuming to do its complicated math for it, I wager that Net-Jets understands probabilities. While all of its owners have guaranteed access to private flight in a timely manner, the company is well aware that they’re not all going to need to fly at once. Something similar is at work in banking. Banks pay for deposits (liabilities) and then almost immediately create loans (assets) with the money they borrow from depositors.
If government is consuming less of the economy’s resources, then entrepreneurs will have more credit to access and utilize in their attempts to turn the luxury that is private flight into a common good. Arguably, the best-known provider of private air transportation is Net-Jets. Based in Columbus, Ohio, and owned by Warren Buffett’s Berkshire Hathaway holding company, NetJets sells fractional ownership of the jets in its fleet of seven hundred planes. The benefits to the customer are fairly apparent. Whether they buy fifty hours of flight time per year or four hundred, they have guaranteed access to the plane they’ve purchased a fraction of with little notice required. Obviously, the bigger the fraction they buy, the more annual flight time they have. NetJets oversees the maintenance of each plane, makes sure the pilots are well-trained and licensed, and houses the planes. All of this means that fractional owners don’t have to take on all the expensive busy work that comes with traditional jet ownership.
The Snowball: Warren Buffett and the Business of Life by Alice Schroeder
affirmative action, Albert Einstein, anti-communist, Ayatollah Khomeini, barriers to entry, Bob Noyce, Bonfire of the Vanities, Brownian motion, capital asset pricing model, card file, centralized clearinghouse, Charles Lindbergh, collateralized debt obligation, computerized trading, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, desegregation, Donald Trump, Eugene Fama: efficient market hypothesis, Everybody Ought to Be Rich, global village, Golden Gate Park, Haight Ashbury, haute cuisine, Honoré de Balzac, If something cannot go on forever, it will stop - Herbert Stein's Law, In Cold Blood by Truman Capote, index fund, indoor plumbing, intangible asset, interest rate swap, invisible hand, Isaac Newton, Jeff Bezos, John Meriwether, joint-stock company, joint-stock limited liability company, Long Term Capital Management, Louis Bachelier, margin call, market bubble, Marshall McLuhan, medical malpractice, merger arbitrage, Mikhail Gorbachev, money market fund, moral hazard, NetJets, new economy, New Journalism, North Sea oil, paper trading, passive investing, Paul Samuelson, pets.com, plutocrats, Plutocrats, Ponzi scheme, Ralph Nader, random walk, Ronald Reagan, Scientific racism, shareholder value, short selling, side project, Silicon Valley, Steve Ballmer, Steve Jobs, supply-chain management, telemarketer, The Predators' Ball, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, transcontinental railway, Upton Sinclair, War on Poverty, Works Progress Administration, Y2K, yellow journalism, zero-coupon bond
At the shareholder meeting, Buffett told investors, “Our idea of tough times is periods like now.”9 With too much cash, too few wonderful ideas, and without calling the Air-a-holic hotline, Buffett now bought a company for Berkshire called NetJets for $725 million.10 He sold the Indefensible and became one of NetJets’ customers. This company sold time-shares in jets of various makes and sizes; its planes all had tail numbers that started with QS, or Quebec Sierra. Susie had gotten Warren to buy her a quarter share in a “fractional” jet from NetJets in 1995, worth two hundred hours a year of flight time, which she referred to as The Richly Deserved.11 She joked that QS stood for Queen Susie. Buffett took to NetJets so much that he had appeared in an ad and endorsed it even before he bought it. Still, on the surface, it was an atypical decision for a man who would, one year later, tell the moguls at Sun Valley that somebody should “have shot Orville down.” The reasoning behind the purchase seemed sound, though. NetJets was dominant in its market; it was too late for any serious competitor to catch up.
Eventually, the competitors would fall away.12 And, indeed, NetJets was outgrowing the competition. Buffett was intrigued with its CEO, Richard Santulli, an entrepreneurial mathematician who had formerly spent his days at Goldman Sachs figuring out trading patterns using chaos-theory mathematics. Now he used those same skills to schedule plane flights on six hours’ notice for a database full of celebrity clients whom he entertained at private events. Buffett met a whole new set of famous people, including Arnold Schwarzenegger and Tiger Woods. Investors cheered Buffett’s purchase of NetJets but were shocked when he almost simultaneously announced that Berkshire was buying General Re, a huge insurance wholesaler, or “reinsurer,” which bought excess risk from other insurers. At $22 billion, this deal was almost thirty times larger than NetJets. It dwarfed by multiples his largest deal ever, GEICO.13 When he met with the Gen Re management team, Buffett told them, “I’m strictly hands-off.
It didn’t bother him. Most would naturally right themselves over time. NetJets, however, was struggling, not just because of the economy but because the premise for buying it—the uniqueness of its franchise—was looking less unique. Other people who forgot to call the Air-aholic hotline kept setting up businesses to compete with NetJets, even though the economics of the fractional aviation business were unattractive. Buffett now realized that it was testosterone that caused Air-aholism. “If only women could be CEOs of companies that flew planes,” he said, “I think it would be a lot better. It’s like sports franchises. If only women could own sports franchises, they’d sell for one-tenth what they sell for now.” He told the shareholders that NetJets would return to profitability and would dominate its market.
Fortunes of Change: The Rise of the Liberal Rich and the Remaking of America by David Callahan
affirmative action, Albert Einstein, American Legislative Exchange Council, automated trading system, Bernie Sanders, Bonfire of the Vanities, carbon footprint, carried interest, clean water, corporate social responsibility, David Brooks, demographic transition, desegregation, don't be evil, Donald Trump, Douglas Engelbart, Douglas Engelbart, Edward Thorp, financial deregulation, financial independence, global village, Gordon Gekko, greed is good, high net worth, income inequality, Irwin Jacobs: Qualcomm, Jeff Bezos, John Markoff, Kickstarter, knowledge economy, knowledge worker, Marc Andreessen, Mark Zuckerberg, market fundamentalism, medical malpractice, mega-rich, Mitch Kapor, Naomi Klein, NetJets, new economy, offshore financial centre, Peter Thiel, plutocrats, Plutocrats, profit maximization, quantitative trading / quantitative ﬁnance, Ralph Nader, Renaissance Technologies, Richard Florida, Robert Bork, rolodex, Ronald Reagan, school vouchers, short selling, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, stem cell, Steve Ballmer, Steve Jobs, unpaid internship, Upton Sinclair, Vanguard fund, War on Poverty, working poor, World Values Survey
Now they do, in part because those critics include their peers. Thus, Booth went on to explain that NetJets Europe was actually hard at work developing a plan to offset its carbon emissions and that the company was committed to doing the “right thing” when it came to climate change. The plan, which was revealed later in September 2007, raised the fees on NetJets’ clients between $4,000 and $5,600 a year to offset the carbon dioxide emissions from their flights. “People want to know we are doing the right thing and every month our customers will be reminded of that in their management fee,” Booth explained.4 Two years later, NetJets announced that it was on track to become carbon neutral by 2012. c03.indd 60 5/11/10 6:18:32 AM the eco rich 61 NetJets wasn’t the first jet charter service to make carbon offsets mandatory for all flights.
The Google Guys flew in on their 767 and then sparked nonstop gossip at the conference about who would get to fly back with them to Silicon Valley. (Facebook founder Mark Zuckerberg was among the lucky who were chosen.) NetJets Europe, the continent’s largest private jet operator, booked no fewer than fifty flights to Davos to handle all of the demand for the conference. These flights were a small fraction of the sixty-five thousand private trips the company operated in Europe in 2006—the equivalent to a plane taking off or landing every eight minutes. When the CEO of NetJets Europe, Mark Booth, was criticized for spewing so much carbon into the air around the Davos event, he scoffed at the naïveté of such attacks. “The question is, do you want CEOs sitting around in airports trying to connect to aircraft?”
c03.indd 60 5/11/10 6:18:32 AM the eco rich 61 NetJets wasn’t the first jet charter service to make carbon offsets mandatory for all flights. Cerulean Jet, based in Austin, Texas, beat NetJets by a few months in taking this step when it announced that it would buy carbon offsets for all of its flights. Ken Starnes, the CEO of Cerulean Jet, commented that “offsetting our carbon footprint is good for business and good for the environment, ultimately increasing our ability to help in the global warming fight.” Times are certainly changing when private jet companies decide that they need to be on the front lines of the “global warming fight” (or when corporate leaders justify their private jets by saying they want to help Africa). But given just how fast norms of acceptable environmental behavior are shifting among the super-rich, Ken Starnes and Cerulean Jet probably didn’t feel that they had much choice. It is risky for any private jet company to get tarred as the laggard in offsetting carbon emissions—a stigma that could diminish market share for years to come.
The Lost Bank: The Story of Washington Mutual-The Biggest Bank Failure in American History by Kirsten Grind
asset-backed security, bank run, banking crisis, big-box store, call centre, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, fixed income, housing crisis, Maui Hawaii, money market fund, mortgage debt, naked short selling, NetJets, shareholder value, short selling, Shoshana Zuboff, Skype, too big to fail, Y2K
Each plane cost $1 million during the life of the contract. Every month the bank paid an additional $14,000 for each of the planes, presumably for maintenance. Each time Killinger flew anywhere, it cost about $700 in fuel costs and about $2,500 each hour the plane spent in the air. It wasn’t unusual for Washington Mutual to shell out a couple hundred thousand dollars each month in plane costs. The cost to the company was not detailed for shareholders. NetJets, the timeshare company WaMu used, described one of the planes, a Cessna Citation X, as “the world’s fastest midsized business jet.” It had a 24-foot cabin and large cushy seats, as well as a refreshment center stocked with sandwiches and drinks. This was hardly the picture of corporate excess; many executives at larger investment banks and finance companies traveled on much bigger planes. Often their companies owned these planes.
That day Tall left the workout room and called Chapman from the hotel. “I think I need to go to the hospital,” he said grimly. Chapman drove Tall to the emergency room. The doctors performed a series of tests late into the evening and delivered bad news: Tall needed open heart surgery, right away. But Tall wanted to return to Seattle and his own doctors. Chapman got on the phone and called Killinger. Could the executives use WaMu’s NetJets account to book a private plane back to Seattle? There was no way Tall could travel on a commercial airline in his fragile condition, Craig Chapman explained. Killinger hesitated. “I don’t know if we can get a private plane down there,” he said. After several minutes of discussion, it seemed to Chapman that Killinger either didn’t want them to use the plane or couldn’t decide whether to let them.
If we don’t get something done soon, this economy is going to collapse.”79 In New York, Alan Fishman, Tom Casey, Fishman’s special consultant Frank Baier (who had been hired to help out with the capital raise), and John McMurray boarded the private jet back to Seattle. They had no further reason to stay on the East Coast. The private auction had failed, and they had received no word from the regulators about WaMu’s capital-raising plan. As they left, investment bankers in New York continued to camp out at the offices of Simpson Thacher, trying to find other ways to save the company. The WaMu executives debated for a long time whether to fly NetJets, which was already paid for, or commercial, which would look better publicly. In the end, they decided it was more important to return quickly and took the private plane. As they sat on the tarmac, waiting to take off, someone got an e-mail: JPMorgan was planning to hold an investor conference call at 9:00 p.m. Eastern Time. In Seattle, at about a quarter to 4:00 p.m. Pacific Time, several members of WaMu’s communications team stood in the bank’s lobby chatting after a coffee break.
The Quants by Scott Patterson
Albert Einstein, asset allocation, automated trading system, beat the dealer, Benoit Mandelbrot, Bernie Madoff, Bernie Sanders, Black Swan, Black-Scholes formula, Blythe Masters, Bonfire of the Vanities, Brownian motion, buttonwood tree, buy and hold, buy low sell high, capital asset pricing model, centralized clearinghouse, Claude Shannon: information theory, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, Doomsday Clock, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, fixed income, Gordon Gekko, greed is good, Haight Ashbury, I will remember that I didn’t make the world, and it doesn’t satisfy my equations, index fund, invention of the telegraph, invisible hand, Isaac Newton, job automation, John Meriwether, John Nash: game theory, Kickstarter, law of one price, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, margin call, merger arbitrage, money market fund, Myron Scholes, NetJets, new economy, offshore financial centre, old-boy network, Paul Lévy, Paul Samuelson, Ponzi scheme, quantitative hedge fund, quantitative trading / quantitative ﬁnance, race to the bottom, random walk, Renaissance Technologies, risk-adjusted returns, Robert Mercer, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Sergey Aleynikov, short selling, South Sea Bubble, speech recognition, statistical arbitrage, The Chicago School, The Great Moderation, The Predators' Ball, too big to fail, transaction costs, value at risk, volatility smile, yield curve, éminence grise
Muller had been frequenting poker halls since the 1980s during his days as a young quant in Berkeley, California. In 2004, he’d become so serious about the game—and so good at it—that he joined the World Poker Tour, pocketing nearly $100,000 in winnings. He played online poker obsessively and even toyed with the bizarre notion of launching an online poker hedge fund. Weinstein, more of a blackjack man, was no slouch at the poker table, having won a Maserati in a 2005 NetJets poker tournament. Griffin simply hated to lose to anyone at anything and approached the poker table with the same brainiac killer instinct that infused his day-to-day trading prowess. No matter how hard they might play elsewhere, no poker game mattered more than when the gamblers around the table were their fellow quants. It was more than a battle of wits over massive pots—it was a battle of enormous egos.
In 2005, Weinstein’s boss, Anshu Jain, flew to meet with Berkshire Hathaway chairman Warren Buffett in Omaha, Nebraska, to discuss a number of the bank’s high-profile trades, including Weinstein’s. The two moguls were chatting about one of their favorite pastimes, bridge, and the conversation eventually switched to poker. Jain mentioned that Weinstein was Deutsche Bank’s poker ace. Intrigued, Buffett invited Weinstein to an upcoming poker tournament in Las Vegas run by NetJets, the private-jet company owned by Berkshire. Weinstein made his boss proud, winning the tournament’s grand prize: a spanking new Maserati. Still, gambling was just a pastime, a mental curiosity or warm-up for the real deal. Weinstein’s main focus, his obsession, remained trading—winning, crushing his opponents, and making money, huge money. He loved it. Soon he started expanding his operation into all kinds of markets, including stocks, currencies, and commodities—much as Ken Griffin was creating a diversified multistrategy fund at Citadel (Weinstein seemed to be modeling his group after Citadel).
Muller, however, had mastered the art of knowing exactly when to fold, when to raise, when to go all in. He never lost his cool, even when he was down. He knew it was only a matter of time before he was back on top. The quant poker games lasted late into the night, at times stretching into the following morning. In 2006, Muller took the PDTers on a ski trip to an exclusive ski resort out west, flying the gang on a NetJets private plane. His treat. It would be one of the last few such trips they would make in years. A credit crisis brewing on Wall Street would put an end to such carefree jaunts. But that was a worry for another day. Muller, meanwhile, was getting restless. Playing endless rounds of poker, hiking exotic trails in Hawaii, kayaking in Peru, shooting off on private jets to the Caribbean, dating models—it was all fun, but something was missing: trading, making millions in the blink of an eye, watching the winnings tick up like a rocket.
Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland
activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Boris Johnson, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, disruptive innovation, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, starchitect, stem cell, Steve Jobs, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game
“There’s so much money on the Upper East Side right now,” she said. “A lot of people under forty years old are making, like, $20 million or $30 million a year in these hedge funds, and they don’t know what to do with it.” As an example, she described a conversation at a dinner party: “They started saying, if you’re going to buy all this stuff, life starts getting really expensive. If you’re going to do the NetJets thing”—this is a service offering “fractional aircraft ownership” for those who do not wish to buy outright—“and if you’re going to have four houses, and you’re going to run the four houses, it’s like you start spending some money.” The clincher, Peterson said, came from one of her dinner companions. “She turns to me and she goes, ‘You know, the thing about twenty is’”—by this she means $20 million per year—“‘twenty is only ten [after taxes].’
A California technology executive—himself a global nomad who has lived and worked in Europe and Asia—explained to me that a company like Bharti has a competitive advantage in what he believes will be the exploding African market: “They know how to provide mobile phones so much more cheaply than we do. In a place like Africa, how can Western firms compete?” ARISTOCRACY OF IDEAS Just as the railroad created new cities, private jets and private jet time-shares like NetJets have contributed to the globalization of the super-elite—owning homes and doing deals around the world becomes feasible when you can travel the planet as easily as the middle class steps into a car. New technologies have helped, too—instant and mobile communication makes it possible to live on the move and around the world. So have the political revolutions that have opened up so many of the world’s borders over the past twenty years.
., 6, 119 Morgan Stanley, 63, 122 Moritz, Michael, 234 mortgage market, 146, 166–67, 169–70, 217 Mossler, Fred, 233 motion picture industry, 98, 100, 109, 127–30 Mount, Harry, 57, 67 Moyo, Dambisa, 266 Mubarak, Hosni, 144 Mullainathan, Sendhil, 138–40 Müller-Ötvös, Torsten, 46 Murphy, Kevin J., 131–34, 137 Murray, Charles, 286 music industry, 109–10, 126–27, 170–71 n-11 economies, 30 Nakamoto, Michiyo, 169 Naspers, 66 Neeleman, David, 156–57 Netherlands, 16 NetJets, 2, 66 New Class, 264–69 New Class, The (Djilas), 89–90 New Deal, 13–14, 132–34, 177 Newsweek, 127 New Yorker, 33 New York Times, 6, 7, 39, 45, 70, 125, 126, 140, 165, 174, 227, 258, 268 New York World, 7 New Zealand, 3, 159–60 Next Convergence, The: The Future of Economic Growth in a Multispeed World (Spence), 20 Nicaragua, 191 Niccolini, Julian, 36 Nigeria, 66 Nobel, Alfred, 71 Nobel Prize, 50, 69, 123, 124, 126, 175 Nolte, Nick, 127 Nucor, 158 Oakland A’s, 129 Obama, Barack, x, 18, 92–93, 242–43, 245, 247, 249, 250, 258, 269 as empiricist, 93 Observer, 74 Occupy movement, 28, 42, 80, 83, 92, 238, 244–45, 248–51 O’Connor, Caroline, 171–72 Odnoklassniki, 163 OECD, 3 O’Neill, Jim, 19, 21, 29–30, 33 one percent, xii, 135 0.1 percent vs., 79–83 99 percent vs., 80 during 1940s–1970s period, 14 in economic recovery of 2009–2010, xiii political vs. economic focus on, xiv share of national income, 3, 14 Open Society Foundations, 70, 77 Orange Revolution, 79–80, 192 Orlov, Yuri, 90 Orszag, Peter, 18 Orwell, George, 90 outsourcing, 92, 105, 106, 155, 179, 241 Oxford University, 62 Page, Larry, 55 PaineWebber, 142 Palin, Sarah, 83, 223 Pangea3, 106–7 paradigm shifts, 144, 145, 164 see also revolutions paradox of happy peasants and miserable millionaires, 31–32, 51, 82 Paulson, Hank, 213, 271–72 Paulson, John, 148, 244 Pavarotti, Luciano, 97, 98 pay for performance, 136, 138, 139 PayPal, 171, 183 Perella, Joe, 170 Peru, 82 Peterson, Holly, 1–3, 52, 80–81 Peterson, Pete, 1, 36–37, 44–45, 70, 78, 80 Petrarca, Francesco, 278 philanthro-capitalism, 71, 74–76, 264, 267 philanthropy, 70–76, 246, 264 Philippines, 25 Philippon, Thomas, 48, 53, 220–21 Pierson, Paul, 18 Piff, Paul, 239 Piketty, Thomas, 34, 43 Pimco, 65, 251 Pinchuk, Victor, 72–73, 268, 270 Pipes, Richard, 145 Pisarev, Kirill, 103 pivoting, 171–73 Platinum Study, 43 Pleading Guilty (Turow), 38 Plepler, Richard, 72 Pliny the Elder, 195 Plutarch, 195 political influence, 222–24, 247, 260–62 political revolutions, 144–46 politicians, 76–79, 269–70 Polo, Marco, 278 Poore, Peter, 76 PopTech, 67 Porter, Michael, 23 Posner, Victor, 120, 122 Potanin, Vladimir, 151 Premji, Azim, 155 Prince, Chuck, 169–70 private equity, 120–22, 128, 190, 243, 280 privatization, 193–94, 205, 207, 222, 225 in Russia, 162–64, 176, 179–81, 188, 192–93, 198, 207, 218, 223, 225 telecom, 196–98 privilege, 239 transferred to children, 282–83 Progress and Poverty (George), 38, 40–41 Progressive Era, 39, 78 Prokhorov, Mikhail, 162 Putin, Vladimir, 80, 107, 149–51, 255 Qiu Ying, 96 Quantum Fund, 142, 143, 154, 172 Queen Elisabeth Competition, 126 Quiggin, John, 48 Radia, Niira, 200 railroads, 178, 191 Raja, Andimuthu, 200 Rajan, Raghuram, 188–89, 198, 201, 228 Rajaratnam, Raj, 121–22 Rakoff, Jed, 256 Rand, Ayn, 249 Rauh, Joshua, 119–20 Ravid, Abraham, 130 Reagan, Ronald, 17, 89 Reagan Revolution, xii real estate, 222–23 Red Capitalism (Walter and Howie), 207–8 Reformed Broker, The, 84 Reich, Robert, 3 Renaissance, 96 Renaissance Capital, 65, 159 rentier elite, 42, 43, 283 rent-seeking, 188–228, 283 in China, 204–10 globalization and, 226–28 in India, 198–200, 228 value creation vs., 280–81 Reshef, Ariell, 48, 220–21 revolutions, 141–87 industrial, see industrial revolution political, 144–46 in technology, xiv, 4, 14–15, 18, 19, 21, 22, 25, 28, 30–31, 67, 100, 104, 146, 157–58, 164, 166, 184, 221, 285 Reynolds, Joshua, 94 “rich,” use of word, x Roach, Stephen, 210 robber barons, xv, 9, 19, 41, 42, 71, 118, 134, 191, 195, 237 Roosevelt on, 177–78 Robertson, Julian, 142 Robinson, James, 279–80 Rockefeller, John D., 195 Rodriguez, Alex, 108–9 Rolls-Royce, 46 Romney, Mitt, 77, 92–94, 236, 237, 286 as empiricist, 93–94 Roosevelt, Franklin Delano, 132 Commonwealth Club speech of, 176–78 New Deal of, 13–14, 132–34, 177 Roosevelt, Theodore, 39 Rose, Charlie, 72 Rosen, Sherwin, 97, 99–100, 107–12, 116, 123 Rosoff, Matt, 238 Royal Bank of Canada, 217 Royal Bank of Scotland, 217 Rubenstein, David, 121, 148–49 Rubin, Bob, 213 Russia, 3, 14, 19, 35, 56, 62, 66, 82, 96, 148, 149, 159–61, 163, 164, 178–81, 186, 206, 260 billionaire-to-GDP ratio in, 189 Bolsheviks in, 14, 93, 145, 284 privatization in, 162–64, 176, 179–81, 188, 192–93, 198, 207, 218, 223, 225 Revolution in, 152–53 science and technology in, 178–79 Russian oligarchs, 42, 46, 51–52, 61–62, 72, 92, 107, 147, 149–52, 186, 193, 196, 223, 255, 285 Ryan, Paul, 83, 190 Sabharwal, Manish, 32 Saez, Emmanuel, xiii, 34, 35–36, 43, 117, 281 Saïd, Wafic, 62 Sainath, Palagummi, 32 Saint Laurent, Yves, 114–16 Salganik, Matthew, 126 Salinas, Carlos, 196, 198 Salomon Brothers, 130 Sandberg, Sheryl, 174–75 Santorum, Rick, 246 Sawiris, Naguib, 4, 35, 77 Say’s law, 30–31 Schiff, Peter, 245 Schmidt, Eric, 56, 58, 69, 104–5, 236, 238, 280–81 Schmidt, Jacqueline, 70 Schrage, Elliot, 47 Schultz, Howard, 69 Schumer, Chuck, 211–13, 227 Schumpeter, Joseph, 32, 118 Schwarzman, Steve, 1, 36–37, 45, 46, 60, 147, 237, 243 science, 123–25 screenplays, 128 Seasteading Institute, 250 Securities and Exchange Commission (SEC), 226, 256 self-interest, 178, 215, 216, 239–40, 243–44, 249, 273–75, 286 Sennett, Mack, 98 Sense and Sensibility (Austen), 274–75 sewing machine, 113–15 Shaw, George Bernard, 39 Shelley, Percy Bysshe, 89 Shubrick, 40 Silicon Valley, 46–47, 56, 93, 163–64, 166, 171, 174, 175, 181–83, 230–31, 235, 236, 238, 283, 285 Silver Lake, 59 Simmons, Ruth, 284 Singapore, 63 Singer, Paul, 77 Singh, Manmohan, 155, 198–99 Sinha, Jayant, 189 skill-biased technical change, 91 skimming, 138 Slim, Carlos, 42, 46, 51, 195–98, 199, 218, 227, 236, 255 Smith, Adam, 67, 131, 138, 194, 229 Smith, Art, 112 Smith, Michael, 102 social mobility, 5, 82, 278–79 income inequality and, 283–84 Socialnet, 183 Somoza family, 191 Sorensen, Alan, 126 Soros, George, 53–54, 70, 73, 77, 141–45, 147, 148, 152–55, 172–73, 242 Soros, Jonathan, 153, 173 Soros, Tivadar, 152–53 South Korea, 32, 193 Soviet republics, former, 20, 77, 149, 155, 192, 193, 267 Soviet Union, 14, 17, 89–90, 144, 155, 178–80, 266 Spectator, 56–57, 59, 67 Spence, Michael, 20, 187 Spitzer, Eliot, 213 Splinter, Michael, 64 sports stars, 108–9, 129, 130, 138 Stalin, Joseph, 20, 90 Stanford Business School, 61, 147 Starr International, 101 Start-Up of You, The (Hoffman), 184–85, 187 Stengel, Rick, 72 Stephenson, Randall, 164, 185–86 Stevenson, Betsey, 32 Stewart, Rod, 36 Stiglitz, Joe, 27 Stock Market Boys, 51 Stoll, Craig, 112–13 Strauss-Kahn, Dominique, 72, 238–39 Stringer, Howard, 36 student activism, 268 Sull, Donald, 145, 147, 167–68, 171 Summers, Larry, xiii, 49, 87, 165, 174 Sunstein, Cass, 93 Sun Valley, 68 Sun Yat-sen, 39 superstars, 88–140 fees charged by, 101–3 globalization and, 91–92, 108 income of, vs. everyone else, 100–101 industrial revolution and, 95–99, 118 and talent vs. capital, 116–17, 122, 129–30 technology and, 91–92, 98–100, 108, 109 “Sustaining New York’s and the US’ Global Financial Services Leadership,” 211–15 Swank, Hilary, 110 Sweden, xii, 3, 12 Switzerland, 35, 63 Szelényi, Ivan, 89–90, 136, 266 Tahrir Square, 80 Taiwan, 35 Tawney, R.
How to Kick Ass on Wall Street by Andy Kessler
Andy Kessler, Bernie Madoff, buttonwood tree, call centre, collateralized debt obligation, family office, fixed income, hiring and firing, invention of the wheel, invisible hand, London Whale, margin call, NetJets, Nick Leeson, pets.com, risk tolerance, Silicon Valley, sovereign wealth fund, time value of money, too big to fail, value at risk
Better to leave the slight impression that your worth every penny, and more. Another note. In good times, you’ll be paid in cash. I don’t know if anyone actually hands out checks anymore, but try to get a check, something tangible for all that work. Then immediately cash it (in case they change their mind) and keep it in the bank. Buy a nice dinner. Don’t buy a Porsche or a place in the Hamptons or a NetJets card. Not yet. Build up the notorious FU money. At least a year or two of living expenses in case you want to leave or have to leave. What you may not realize is that in bad times, you still are going to be paid some bonus, though much lower than you’d like. But that bonus is often paid with little pieces of paper with your CEO’s picture on it. Basically stock that you can’t redeem for years. Lots of people who leverage up and buy huge condos and enjoy massive life styles have a tough time when all they get is stock instead of cash.
Other People's Money: Masters of the Universe or Servants of the People? by John Kay
Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, buy and hold, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, corporate governance, Credit Default Swap, cross-subsidies, dematerialisation, disruptive innovation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, John Meriwether, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost airline, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, money market fund, moral hazard, mortgage debt, Myron Scholes, NetJets, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, purchasing power parity, quantitative easing, quantitative trading / quantitative ﬁnance, railway mania, Ralph Waldo Emerson, random walk, regulatory arbitrage, Renaissance Technologies, rent control, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, Schrödinger's Cat, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, Washington Consensus, We are the 99%, Yom Kippur War
Stock markets provide the clearest, and perhaps most important, illustration of these approaches and the changes in the nature of intermediation in the era of financialisation. Warren Buffett is the most successful investor in history, having parlayed modest beginnings into a fortune that has made him one of the richest men in the world. Berkshire Hathaway is now one of the largest US companies. Berkshire Hathaway owns the world’s largest re-insurance company, GEICO, businesses as diverse as Netjets (which charters executive jets), Equitas (the insurance company created to handle the fall-out from the Lloyd’s débâcle) and See’s Candies. Berkshire also holds substantial stakes in major quoted companies, such as Coca-Cola and Procter & Gamble. Buffett is distinguished by the extreme simplicity of his methods, his disdain for the conventional wisdom of the finance industry and his refusal to invest in anything he finds difficult to understand.
.: Hyperion 220 Loomis, Carol 108 lotteries 65, 66, 68, 72 Lucas, Robert 40 Lynch, Dennios 108 Lynch, Peter 108, 109 M M-Pesa 186 Maastricht Treaty (1993) 243, 250 McCardie, Sir Henry 83, 84, 282, 284 McGowan, Harry 45 Machiavelli, Niccolò 224 McKinley, William 44 McKinsey 115, 126 Macy’s department store 46 Madoff, Bernard 29, 118, 131, 132, 177, 232, 293 Madoff Securities 177 Magnus, King of Sweden 196 Manhattan Island, New York: and Native American sellers 59, 63 Manne, Henry 46 manufacturing companies, rise of 45 Marconi 48 marine insurance 62, 63 mark-to-market accounting 126, 128–9, 320n22 mark-to-model approach 128–9, 320n21 Market Abuse Directive (MAD) 226 market economy 4, 281, 302, 308 ‘market for corporate control, the’ 46 market risk 97, 98, 177, 192 market-makers 25, 28, 30, 31 market-making 49, 109, 118, 136 Markets in Financial Instruments Directive (MIFID) 226 Markkula, Mike 162, 166, 167 Markopolos, Harry 232 Markowitz, Harry 69 Markowitz model of portfolio allocation 68–9 Martin, Felix 323n5 martingale 130, 131, 136, 139, 190 Marx, Groucho 252 Marx, Karl 144, 145 Capital 143 Mary Poppins (film) 11, 12 MasterCard 186 Masters, Brooke 120 maturity transformation 88, 92 Maxwell, Robert 197, 201 Mayan civilisation 277 Meade, James 263 Means, Gardiner 51 Meeker, Mary 40, 167 Melamed, Leo 19 Mercedes 170 merchant banks 25, 30, 33 Meriwether, John 110, 134 Merkel, Angela 231 Merrill Lynch 135, 199, 293, 300 Merton, Robert 110 Metronet 159 Meyer, André 205 MGM 33 Microsoft 29, 167 middleman, role of the 80–87 agency and trading 82–3 analysts 86 bad intermediaries 81–2 from agency to trading 84–5 identifying goods and services required 80, 81 logistics 80, 81 services from financial intermediaries 80–81 supply chain 80, 81 transparency 84 ‘wisdom of crowds’ 86–7 Midland Bank 24 Milken, Michael 46, 292 ‘millennium bug’ 40 Miller, Bill 108, 109 Minuit, Peter 59, 63 Mises, Ludwig von 225 Mittelstand (medium-size business sector) 52, 168, 169, 170, 171, 172 mobile banking apps 181 mobile phone payment transfers 186–7 Modigliani-Miller theorem 318n9 monetarism 241 monetary economics 5 monetary policy 241, 243, 245, 246 money creation 88 money market fund 120–21 Moneyball phenomenon 165 monopolies 45 Monte Carlo casino 123 Monte dei Paschi Bank of Siena 24 Montgomery Securities 167 Moody’s rating agency 21, 248, 249, 313n6 moral hazard 74, 75, 76, 92, 95, 256, 258 Morgan, J.P. 44, 166, 291 Morgan Stanley 25, 40, 130, 135, 167, 268 Morgenthau, District Attorney Robert 232–3 mortality tables 256 mortgage banks 27 mortgage market fluctuation in mortgage costs 148 mechanised assessment 84–5 mortgage-backed securities 20, 21, 40, 85, 90, 100, 128, 130, 150, 151, 152, 168, 176–7, 284 synthetic 152 Mozilo, Angelo 150, 152, 154, 293 MSCI World Bank Index 135 muckraking 44, 54–5, 79 ‘mugus’ 118, 260 multinational companies, and diversification 96–7 Munger, Charlie 127 Munich, Germany 62 Munich Re 62 Musk, Elon 168 mutual funds 27, 108, 202, 206 mutual societies 30 mutualisation 79 mutuality 124, 213 ‘My Way’ (song) 72 N Napoleon Bonaparte 26 Napster 185 NASA 276 NASDAQ 29, 108, 161 National Economic Council (US) 5, 58 National Employment Savings Trust (NEST) 255 National Institutes of Health 167 National Insurance Fund (UK) 254 National Provincial Bank 24 National Science Foundation 167 National Westminster Bank 24, 34 Nationwide 151 Native Americans 59, 63 Nazis 219, 221 neo-liberal economic policies 39, 301 Netjets 107 Netscape 40 Neue Markt 170 New Deal 225 ‘new economy’ bubble (1999) 23, 34, 40, 42, 98, 132, 167, 199, 232, 280 new issue market 112–13 New Orleans, Louisiana: Hurricane Katrina disaster (2005) 79 New Testament 76 New York Stock Exchange 26–7, 28, 29, 31, 49, 292 New York Times 283 News of the World 292, 295 Newton, Isaac 35, 132, 313n18 Niederhoffer, Victor 109 NINJAs (no income, no job, no assets) 222 Nixon, Richard 36 ‘no arbitrage’ condition 69 non-price competition 112, 219 Norman, Montagu 253 Northern Rock 89, 90–91, 92, 150, 152 Norwegian sovereign wealth fund 161, 253 Nostradamus 274 O Obama, Barack 5, 58, 77, 194, 271, 301 ‘Obamacare’ 77 Occidental Petroleum 63 Occupy movement 52, 54, 312n2 ‘Occupy Wall Street’ slogan 305 off-balance-sheet financing 153, 158, 160, 210, 250 Office of Thrift Supervision 152–3 oil shock (1973–4) 14, 36–7, 89 Old Testament 75–6 oligarchy 269, 302–3, 305 oligopoly 118, 188 Olney, Richard 233, 237, 270 open market operations 244 options 19, 22 Organisation for Economic Co-operation and Development (OECD) 263 Osborne, George 328n19 ‘out of the money option’ 102, 103 Overend, Gurney & Co. 31 overseas assets and liabilities 179–80, 179 owner-managed businesses 30 ox parable xi-xii Oxford University 12 P Pacific Gas and Electric 246 Pan Am 238 Paris financial centre 26 Parliamentary Commission on Banking Standards 295 partnerships 30, 49, 50, 234 limited liability 313n14 Partnoy, Frank 268 passive funds 99, 212 passive management 207, 209, 212 Patek Philippe 195, 196 Paulson, Hank 300 Paulson, John 64, 109, 115, 152, 191, 284 ‘payment in kind’ securities 131 payment protection policies 198 payments system 6, 7, 25, 180, 181–8, 247, 259–60, 281, 297, 306 PayPal 167, 168, 187 Pecora, Ferdinand 25 Pecora hearings (1932–34) 218 peer-to-peer lending 81 pension funds 29, 98, 175, 177, 197, 199, 200, 201, 208, 213, 254, 282, 284 pension provision 78, 253–6 pension rights 53, 178 Perkins, Charles 233 perpetual inventory method 321n4 Perrow, Charles 278, 279 personal financial management 6, 7 personal liability 296 ‘petrodollars’ 14, 37 Pfizer 96 Pierpoint Morgan, J. 165 Piper Alpha oil rig disaster (1987) 63 Ponzi, Charles 131, 132 Ponzi schemes 131, 132, 136, 201 pooled investment funds 197 portfolio insurance 38 Potts, Robin, QC 61, 63, 72, 119, 193 PPI, mis-selling of 296 Prebble, Lucy: ENRON 126 price competition 112, 219 price discovery 226 price mechanism 92 Prince, Chuck 34 private equity 27, 98, 166, 210 managers 210, 289 private insurance 76, 77 private sector 78 privatisation 39, 78, 157, 158, 258, 307 probabilistic thinking 67, 71, 79 Procter & Gamble 69, 108 product innovation 13 property and infrastructure 154–60 protectionism 13 Prudential 200 public companies, conversion to 18, 31–2, 49 public debt 252 public sector 78 Q Quandt, Herbert 170 Quandt Foundation 170 quantitative easing 245, 251 quantitative style 110–11 quants 22, 107, 110 Quattrone, Frank 167, 292–3 queuing 92 Quinn, Sean 156 R railroad regulation 237 railway mania (1840s) 35 Raines, Franklin 152 Rajan, Raghuram 56, 58, 79, 102 Rakoff, Judge Jed 233, 294, 295 Ramsey, Frank 67, 68 Rand, Ayn 79, 240 ‘random walk’ 69 Ranieri, Lew 20, 22, 106–7, 134, 152 rating agencies 21, 41, 84–5, 97, 151, 152, 153, 159, 249–50 rationality 66–7, 68 RBS see Royal Bank of Scotland re-insurance 62–3 Reagan, Ronald 18, 23, 54, 59, 240 real economy 7, 18, 57, 143, 172, 190, 213, 226, 239, 271, 280, 288, 292, 298 redundancy 73, 279 Reed, John 33–4, 48, 49, 50, 51, 242, 293, 314n40 reform 270–96 other people’s money 282–5 personal responsibility 292–6 principles of 270–75 the reform of structure 285–92 robust systems and complex structures 276–81 regulation 215, 217–39 the Basel agreements 220–25 and competition 113 the origins of financial regulation 217–19 ‘principle-based’ 224 the regulation industry 229–33 ‘rule-based’ 224 securities regulation 225–9 what went wrong 233–9 ‘Regulation Q’ (US) 13, 14, 20, 28, 120, 121 regulatory agencies 229, 230, 231, 235, 238, 274, 295, 305 regulatory arbitrage 119–24, 164, 223, 250 regulatory capture 237, 248, 262 Reich, Robert 265, 266 Reinhart, C.M. 251 relationship breakdown 74, 79 Rembrandts, genuine/fake 103, 127 Renaissance Technologies 110, 111, 191 ‘repo 105’ arbitrage 122 repo agreement 121–2 repo market 121 Reserve Bank of India 58 Reserve Primary Fund 121 Resolution Trust Corporation 150 retirement pension 78 return on equity (RoE) 136–7, 191 Revelstoke, first Lord 31 risk 6, 7, 55, 56–79 adverse selection and moral hazard 72–9 analysis by ‘ketchup economists’ 64 chasing the dream 65–72 Geithner on 57–8 investment 256 Jackson Hole symposium 56–7 Kohn on 56 laying bets on the interpretation of incomplete information 61 and Lloyd’s 62–3 the LMX spiral 62–3, 64 longevity 256 market 97, 98 mitigation 297 randomness 76 socialisation of individual risks 61 specific 97–8 risk management 67–8, 72, 79, 137, 191, 229, 233, 234, 256 risk premium 208 risk thermostat 74–5 risk weighting 222, 224 risk-pooling 258 RJR Nabisco 46, 204 ‘robber barons’ 44, 45, 51–2 Robertson, Julian 98, 109, 132 Robertson Stephens 167 Rockefeller, John D. 44, 52, 196 Rocket Internet 170 Rogers, Richard 62 Rogoff, K.S. 251 rogue traders 130, 300 Rohatyn, Felix 205 Rolls-Royce 90 Roman empire 277, 278 Rome, Treaty of (1964) 170 Rooney, Wayne 268 Roosevelt, Franklin D. v, 25, 235 Roosevelt, Theodore 43–4, 235, 323n1 Rothschild family 217 Royal Bank of Scotland 11, 12, 14, 24, 26, 34, 78, 91, 103, 124, 129, 135, 138, 139, 211, 231, 293 Rubin, Robert 57 In an Uncertain World 67 Ruskin, John 60, 63 Unto this Last 56 Russia defaults on debts 39 oligarchies 303 Russian Revolution (1917) 3 S Saes 168 St Paul’s Churchyard, City of London 305 Salomon Bros. 20, 22, 27, 34, 110, 133–4 ‘Salomon North’ 110 Salz Review: An Independent Review of Barclays’ Business Practices 217 Samuelson, Paul 208 Samwer, Oliver 170 Sarkozy, Nicolas 248, 249 Savage, L.J. 67 Scholes, Myron 19, 69, 110 Schrödinger’s cat 129 Scottish Parliament 158 Scottish Widows 26, 27, 30 Scottish Widows Fund 26, 197, 201, 212, 256 search 195, 209, 213 defined 144 and the investment bank 197 Second World War 36, 221 secondary markets 85, 170, 210 Securities and Exchange Commission (SEC) 20, 64, 126, 152, 197, 225, 226, 228, 230, 232, 247, 292, 293, 294, 313n6 securities regulation 225–9 securitisation 20–21, 54, 100, 151, 153, 164, 169, 171, 222–3 securitisation boom (1980s) 200 securitised loans 98 See’s Candies 107 Segarra, Carmen 232 self-financing companies 45, 179, 195–6 sell-side analysts 199 Sequoia Capital 166 Shad, John S.R. 225, 228–9 shareholder value 4, 45, 46, 50, 211 Sharpe, William 69, 70 Shell 96 Sherman Act (1891) 44 Shiller, Robert 85 Siemens 196 Siemens, Werner von 196 Silicon Valley, California 166, 167, 168, 171, 172 Simon, Hermann 168 Simons, Jim 23, 27, 110, 111–12, 124 Sinatra, Frank 72 Sinclair, Upton 54, 79, 104, 132–3 The Jungle 44 Sing Sing maximum-security gaol, New York 292 Skilling, Jeff 126, 127, 128, 149, 197, 259 Slim, Carlos 52 Sloan, Alfred 45, 49 Sloan Foundation 49 small and medium-size enterprises (SMEs), financing 165–72, 291 Smith, Adam 31, 51, 60 The Wealth of Nations v, 56, 106 Smith, Greg 283 Smith Barney 34 social security 52, 79, 255 Social Security Trust Fund (US) 254, 255 socialism 4, 225, 301 Société Générale 130 ‘soft commission’ 29 ‘soft’ commodities 17 Soros, George 23, 27, 98, 109, 111–12, 124, 132 South Sea Bubble (18th century) 35, 132, 292 sovereign wealth funds 161, 253 Soviet empire 36 Soviet Union 225 collapse of 23 lack of confidence in supplies 89–90 Spain: property bubble 42 Sparks, D.L. 114, 283, 284 specific risk 97–8 speculation 93 Spitzer, Eliot 232, 292 spread 28, 94 Spread Networks 2 Square 187 Stamp Duty 274 Standard & Poor’s rating agency 21, 99, 248, 249, 313n6 Standard Life 26, 27, 30 standard of living 77 Standard Oil 44, 196, 323n1 Standard Oil of New Jersey (later Exxon) 323n1 Stanford University 167 Stanhope 158 State Street 200, 207 sterling devaluation (1967) 18 stewardship 144, 163, 195–203, 203, 208, 209, 210, 211, 213 Stewart, Jimmy 12 Stigler, George 237 stock exchanges 17 see also individual stock exchanges stock markets change in organisation of 28 as a means of taking money out of companies 162 rise of 38 stock-picking 108 stockbrokers 16, 25, 30, 197, 198 Stoll, Clifford 227–8 stone fei (in Micronesia) 323n5 Stone, Richard 263 Stora Enso 196 strict liability 295–6 Strine, Chancellor Leo 117 structured investment vehicles (SIVs) 158, 223 sub-prime lending 34–5, 75 sub-prime mortgages 63, 75, 109, 149, 150, 169, 244 Summers, Larry 22, 55, 73, 119, 154, 299 criticism of Rajan’s views 57 ‘ketchup economics’ 5, 57, 69 support for financialisation 57 on transformation of investment banking 15 Sunday Times 143 ‘Rich List’ 156 supermarkets: financial services 27 supply chain 80, 81, 83, 89, 92 Surowiecki, James: The Wisdom of Crowds xi swap markets 21 SWIFT clearing system 184 Swiss Re 62 syndication 62 Syriza 306 T Taibbi, Matt 55 tailgating 102, 103, 104, 128, 129, 130, 136, 138, 140, 152, 155, 190–91, 200 Tainter, Joseph 277 Taleb, Nassim Nicholas 125, 183 Fooled by Randomness 133 Tarbell, Ida 44, 54 TARGET2 system 184, 244 TARP programme 138 tax havens 123 Taylor, Martin 185 Taylor Bean and Whitaker 293 Tea Party 306 technological innovation 13, 185, 187 Tel Aviv, Israel 171 telecommunications network 181, 182 Tesla Motors 168 Tetra 168 TfL 159 Thai exchange rate, collapse of (1997) 39 Thain, John 300 Thatcher, Margaret 18, 23, 54, 59, 148, 151, 157 Thiel, Peter 167 Third World debt problem 37, 131 thrifts 25, 149, 150, 151, 154, 174, 290, 292 ticket touts 94–5 Tobin, James 273 Tobin tax 273–4 Tolstoy, Count Leo 97 Tonnies, Ferdinand 17 ‘too big to fail’ 75, 140, 276, 277 Tourre, Fabrice ‘Fabulous Fab’ 63–4, 115, 118, 232, 293, 294 trader model 82, 83 trader, rise of the 16–24 elements of the new trading culture 21–2 factors contributing to the change 17–18 foreign exchange 18–19 from personal relationships to anonymous markets 17 hedge fund managers 23 independent traders 22–3 information technology 19–20 regulation 20 securitisation 20–21 shift from agency to trading 16 trading as a principal source of revenue and remuneration 17 trader model 82, 83 ‘trading book’ 320n20 transparency 29, 84, 205, 210, 212, 226, 260 Travelers Group 33, 34, 48 ‘treasure islands’ 122–3 Treasuries 75 Treasury (UK) 135, 158 troubled assets relief program 135 Truman, Harry S. 230, 325n13 trust 83–4, 85, 182, 213, 218, 260–61 Tuckett, David 43, 71, 79 tulip mania (1630s) 35 Turner, Adair 303 TWA 238 Twain, Mark: Pudd’nhead Wilson’s Calendar 95–6 Twitter 185 U UBS 33, 134 UK Independence Party 306 unemployment 73, 74, 79 unit trusts 202 United States global dominance of the finance industry 218 house prices 41, 43, 149, 174 stock bubble (1929) 201 universal banks 26–7, 33 University of Chicago 19, 69 ‘unknown unknowns’ 67 UPS delivery system 279–80 US Defense Department 167 US Steel 44 US Supreme Court 228, 229, 304 US Treasury 36, 38, 135 utility networks 181–2 V value discovery 226–7 value horizon 109 Van Agtmael, Antoine 39 Vanderbilt, Cornelius 44 Vanguard 200, 207, 213 venture capital 166 firms 27, 168 venture capitalists 171, 172 Vickers Commission 194 Viniar, David 204–5, 233, 282, 283, 284 VISA 186 volatility 85, 93, 98, 103, 131, 255 Volcker, Paul 150, 181 Volcker Rule 194 voluntary agencies 258 W wagers and credit default swaps 119 defined 61 at Lloyd’s coffee house 71–2 lottery tickets 65 Wall Street, New York 1, 16, 312n2 careers in 15 rivalry with London 13 staffing of 217 Wall Street Crash (1929) 20, 25, 27, 36, 127, 201 Wall Street Journal 294 Wallenberg family 108 Walmart 81, 83 Warburg 134 Warren, Elizabeth 237 Washington consensus 39 Washington Mutual 135, 149 Wasserstein, Bruce 204, 205 Watergate affair 240 ‘We are the 99 per cent’ slogan 52, 305 ‘We are Wall Street’ 16, 55, 267–8, 271, 300, 301 Weber, Max 17 Weill, Sandy 33–4, 35, 48–51, 55, 91, 149, 293, 314n40 Weinstock, Arnold 48 Welch, Jack 45–6, 48, 50, 52, 126, 314n40 WestLB 169 Westminster Bank 24 Whitney, Richard 292 Wilson, Harold 18 windfall payments 14, 32, 127, 153, 290 winner’s curse 103, 104, 156, 318n11 Winslow Jones, Alfred 23 Winton Capital 111 Wolfe, Humbert 7 The Uncelestial City 1 Wolfe, Tom 268 The Bonfire of the Vanities 16, 22 women traders 22 Woodford, Neil 108 Woodward, Bob: Maestro 240 World Bank 14, 220 World.Com bonds 197 Wozniak, Steve 162 Wriston, Walter 37 Y Yellen, Janet 230–31 Yom Kippur War (1973) 36 YouTube 185 Z Zurich, Switzerland 62
Brazillionaires: The Godfathers of Modern Brazil by Alex Cuadros
affirmative action, Asian financial crisis, big-box store, BRICs, cognitive dissonance, creative destruction, crony capitalism, Deng Xiaoping, Donald Trump, Elon Musk, facts on the ground, family office, high net worth, index fund, invisible hand, Jeff Bezos, Mark Zuckerberg, NetJets, offshore financial centre, profit motive, rent-seeking, risk/return, Rubik’s Cube, savings glut, short selling, Silicon Valley, sovereign wealth fund, stem cell, The Wealth of Nations by Adam Smith, too big to fail, transatlantic slave trade, We are the 99%, William Langewiesche
I saw Lorenzo Mendoza, Venezuela’s third-richest man, just standing around casually chatting with an acquaintance, because at least in this room, he was not the center of attention. Gradually, little red dots appeared stickered below artworks that had sold. To call your VIP lounge by its name would be crass, so the fair had a Collectors’ Lounge. Crates of Miami Basel’s official champagne were arrayed in a kind of rainbow shape at one side. The champagne brand, Ruinart, was not a conceptual artist’s joke. Past the bar I could see a booth for NetJets, the private-plane time-share company. Toward the back of the lounge was another, smaller lounge administered by UBS, the Swiss bank. You could only enter with some higher-level credential I hadn’t heard of. The fair was organized like Russian nesting dolls of exclusivity. I stopped by my friend’s gallery space for a chat. She told me she’d seen Alfredo Setubal, an heir to Latin America’s largest private-sector bank, Itaú Unibanco.
See also MMX Mineração & Metálicos; Vale Amazon gold rush, 138–39 Carajás, 168–69 Cavalcanti and, 189 first mechanized alluvial mine, 139–40, 169–70 government investments, 168 niobium, 212 Miterhof, Marcelo, 54–55, 293n54 MMX Mineração & Metálicos, 30, 137, 140, 144, 145, 169, 186, 189, 215, 216, 220, 246, 303n140 bankruptcy of, 252 Eike cash injection promise, 191, 308n191 Monteiro de Carvalho, Olavo, 262–63 Moraes, Antônio Ermírio de, 14, 39, 48 wealth of, 90 Moraes, Olacyr de, 48, 294n62 Moraes, Vinícius de, 11 Morgan, J. Pierpont, 131 Moro, Sergio, 273–74, 316n274 MPX Energia, 144, 147, 170, 186, 222, 246, 247 bankruptcy of, 252 Murdoch, Rupert, 93, 298n93 Musk, Elon, 277 Não Somos Racistas (Kamel), 100, 207 Naouri, Jean-Charles, 4 Nasaw, David, 205–6 Natal, Brazil, 313n237 National Foundation of the Indian (Funai), 69, 74 National Oil Agency (ANP), 248 Natura Cosméticos, 213 Nestlé, 291n42 NetJets, 28 Neves, Aécio, noteTK Neves, Tancredo, 89–90 Newcomb, Peter, 29 New York Times Maggi interview, 62, 64 Niemeyer, Oscar, 63 Nissan car company, 190 Niué island, 24 Norte Energia, 71, 73, 74, 75 NRX-Newrest, 155 OAS, 239 bankruptcy of, 273 Belo Monte dam and, 239 Carwash and, 270–71 Natal soccer stadium, 313n237 political donations and favors, 239–40, 285TK, 313n239 Roberto Marinho Ave. costs and, 34, 239 Obama, Barack, 16 Oban (Operação Bandeirante), 40–41, 42–43, 44, 87, 290n40 companies supporting, 40, 42, 291n41, 291n42 Occupy Wall Street, 17, 236 o clube da propina (bribe club), 273, 274 Odebrecht, 30, 32, 36, 44, 45, 55, 289n36, 291–92n44 aligned with Brazil’s interests, 56–57 Arena Corinthians and, 258 Belo Monte dam and, 67, 71, 72, 77 campaign donations and, 275, 284 Carwash and cartel for Petrobras contracts, 51, 270–71 Lula and, 57, 274, 285TK, 293–94n57, 316–17n274 Maracanã stadium and, 226, 227, 238 Olympic Games construction, 274 Olympic Village construction, 283–84 Odebrecht, Emílio, 51, 275 Odebrecht, Marcelo, 58, 76, 202, 273–74, 275, 293–94n57 plea-bargain, noteTK prison sentence, 285TK Odebrecht, Norberto, 291–92n44 OGX Petróleo, 135–36, 144, 145–46, 147, 150, 151–52, 156, 247, 248, 262–64, 303n136, 304n146 auction of assets, 252 auditing of, 152, 245 bankruptcy of, 247, 314n247 bonds sold, 181–82 Carneiro as CEO, 249 cessation of production, 242 CVM investigation and, 248–49, 276, 314n248 efforts to bail out, 220, 222, 223, 240–41 Eike promises to inject cash, 190–91, 241, 249, 308n190 Eike sells stock in, 241 executive luxuries, 215 impact on Eike’s empire, 187, 188 investor losses, 245, 261 investors, 182, 193, 224–25 losses of, 185–88, 189, 215, 224–25 Mendonça as CEO, 216–17 Schlumberger report, 261 stock price and, 186, 241–42 oil production, xv, 15–16, 30, 135–36, 145.
A Man for All Markets by Edward O. Thorp
3Com Palm IPO, Albert Einstein, asset allocation, beat the dealer, Bernie Madoff, Black Swan, Black-Scholes formula, Brownian motion, buy and hold, buy low sell high, carried interest, Chuck Templeton: OpenTable:, Claude Shannon: information theory, cognitive dissonance, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Edward Thorp, Erdős number, Eugene Fama: efficient market hypothesis, financial innovation, George Santayana, German hyperinflation, Henri Poincaré, high net worth, High speed trading, index arbitrage, index fund, interest rate swap, invisible hand, Jarndyce and Jarndyce, Jeff Bezos, John Meriwether, John Nash: game theory, Kenneth Arrow, Livingstone, I presume, Long Term Capital Management, Louis Bachelier, margin call, Mason jar, merger arbitrage, Murray Gell-Mann, Myron Scholes, NetJets, Norbert Wiener, passive investing, Paul Erdős, Paul Samuelson, Pluto: dwarf planet, Ponzi scheme, price anchoring, publish or perish, quantitative trading / quantitative ﬁnance, race to the bottom, random walk, Renaissance Technologies, RFID, Richard Feynman, risk-adjusted returns, Robert Shiller, Robert Shiller, rolodex, Sharpe ratio, short selling, Silicon Valley, Stanford marshmallow experiment, statistical arbitrage, stem cell, stocks for the long run, survivorship bias, The Myth of the Rational Market, The Predators' Ball, the rule of 72, The Wisdom of Crowds, too big to fail, Upton Sinclair, value at risk, Vanguard fund, Vilfredo Pareto, Works Progress Administration
Second, there are wholly owned or controlled companies such as Wesco Financial, World Book Encyclopedia, and Clayton Homes. The 2003 annual report lists some sixty-six of these, with 172,000 employees, orchestrated by Warren and Charlie from a corporate office that has “swollen” to sixteen employees. Third and perhaps most important is the insurance segment consisting mostly of GEICO and the reinsurance company General Re. We headed for lunch and the NetJets exhibit at the local airport. Saturday night we were back at Gorat’s. The price of the T-bone dinner we had Friday was, as a “special for shareholders,” now $3 more. Charlie Munger reluctantly worked the room we were in and I mentioned to him a tale I’d heard about his youth. Charlie had gone to Harvard Law School and, when my friend Paul Marx got his degree there a few years later, he found that Charlie was a legend—with many saying he was the smartest person ever to have attended.
First are the positions in publicly traded companies like Coca-Cola, The Washington Post, and Gillette. The securities markets price these every day. Is this Buffett portfolio worth more than, less than, or the same as its market price? Should one add a premium for Buffett’s market timing and stock-picking prowess? Second are numerous wholly owned companies such as See’s Candies, Clayton Homes, and NetJets. We can value these by applying the principles of security analysis to the balance sheets, and by considering the growth rates of the companies, their “franchise value,” and the quality of management. The third component is the insurance group, with GEICO the most important. To value these non-public companies we use, in addition to security analysis as above, the value of the “float.” This is money paid as premiums that is currently being held to pay off future claims.
The Little Book of Hedge Funds by Anthony Scaramucci
Andrei Shleifer, asset allocation, Bernie Madoff, business process, carried interest, corporate raider, Credit Default Swap, diversification, diversified portfolio, Donald Trump, Eugene Fama: efficient market hypothesis, fear of failure, fixed income, follow your passion, Gordon Gekko, high net worth, index fund, John Meriwether, Long Term Capital Management, mail merge, margin call, mass immigration, merger arbitrage, money market fund, Myron Scholes, NetJets, Ponzi scheme, profit motive, quantitative trading / quantitative ﬁnance, random walk, Renaissance Technologies, risk-adjusted returns, risk/return, Ronald Reagan, Saturday Night Live, Sharpe ratio, short selling, Silicon Valley, Thales and the olive presses, Thales of Miletus, the new new thing, too big to fail, transaction costs, Vanguard fund, Y2K, Yogi Berra, zero-sum game
As such, investors must ask themselves what type of investment vehicle is the most appropriate given their investment goals. Based upon that answer, they must then ascertain which money manager possesses the best-equipped toolbox and skill set to help them achieve these objectives and make money. By the way, my friends, back in 1956 Mr. Buffett himself had a hedge fund and operated more than 12 hedge fund partnerships until 1970. Furthermore, is it any more grotesque a fee arrangement than to fly on NetJets, a Berkshire Hathaway subsidiary? Please pass the carrots with the hypocrisy; I need my night vision. As the expression goes, “Let he who is without sin, cast the first stone.” And let hedge fund managers who are incentivized to perform, make the next big trade. In the Words of a Hedge Fund Legend . . . Steve Tananbaum: Chief Executive Officer & Chief Investment Officer, GoldenTree Asset Management 1.
The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success by William Thorndike
Albert Einstein, Atul Gawande, Berlin Wall, Checklist Manifesto, choice architecture, Claude Shannon: information theory, collapse of Lehman Brothers, compound rate of return, corporate governance, discounted cash flows, diversified portfolio, Donald Trump, Fall of the Berlin Wall, Gordon Gekko, intangible asset, Isaac Newton, Louis Pasteur, Mark Zuckerberg, NetJets, Norman Mailer, oil shock, pattern recognition, Ralph Waldo Emerson, Richard Feynman, shared worldview, shareholder value, six sigma, Steve Jobs, Thomas Kuhn: the structure of scientific revolutions
Buffett offers an environment that is completely free of corporate bureaucracy, with unlimited access to capital for worthwhile projects. This package is highly differentiated from the private equity alternative, which promises a high level of investor involvement and a typical five-year holding period before the next exit event. Buffett never participates in auctions. As David Sokol, the (now former) CEO of MidAmerican Energy and NetJets, told me, “We simply don’t get swept away by the excitement of bidding.”9 Instead, remarkably, Buffett has created a system in which the owners of leading private companies call him. He avoids negotiating valuation, asking interested sellers to contact him and name their price. He promises to give an answer “usually in five minutes or less.”10 This requirement forces potential sellers to move quickly to their lowest acceptable price and ensures that his time is used efficiently.
Execution: The Discipline of Getting Things Done by Larry Bossidy
Albert Einstein, business process, complexity theory, Iridium satellite, Long Term Capital Management, NetJets, old-boy network, shareholder value, six sigma, social software, Socratic dialogue, supply-chain management
Each requires Cross to deal with different competitors, channels, economics, and pricing. A new market segment in the aircraft industry has recently changed the dynamics for manufacturers and suppliers. In the past seven or eight years, as commercial airline service and schedules deteriorated and prices rose, the corporate jet business has taken off. In 1996 Executive Jets pioneered fractional ownership, which is time-sharing in the sky, with its NetJet program. The new segment it created rapidly became the fastest-growing one in the business. Among manufacturers the big winner was Bombardier of Canada, because Bombardier built planes that were right for the market—larger than the ones made by rivals such as Beech Aviation and Cessna and smaller than those of Boeing or McDonnell Douglas, and foreign competitors. Who Is the Competition? Sometimes businesses miss the emergence of new competitors who have more attractive value propositions for their customers.
Money Mavericks: Confessions of a Hedge Fund Manager by Lars Kroijer
activist fund / activist shareholder / activist investor, Bernie Madoff, capital asset pricing model, corporate raider, diversification, diversified portfolio, family office, fixed income, forensic accounting, Gordon Gekko, hiring and firing, implied volatility, index fund, intangible asset, Jeff Bezos, Just-in-time delivery, Long Term Capital Management, merger arbitrage, NetJets, new economy, Ponzi scheme, post-work, risk-adjusted returns, risk/return, shareholder value, Silicon Valley, six sigma, statistical arbitrage, Vanguard fund, zero-coupon bond
Although we still pride ourselves on being the furthest you can come from nouveau riche, we had become part of the privileged and affluent, and perhaps had started to act the part more than we acknowledged. Our girls joined the ranks of pretty blonde princesses being led to their £12,000-a-year private nursery by someone who was obviously not Mummy. For the first time in my life, I even started to buy business-class airline tickets. It seemed almost natural at the time and we could easily justify the expense. I even took a call from Netjets (the private jet-share company) and thought about it for ten seconds before deciding that it was a serious waste of money. In Denmark in the late 1970s and early 1980s you were considered wealthy if your family had two cars – which we did. But we were not rich. Not rich like I got to see and experience in London in the early part of the new millennium. As a child I would count my savings every three months.
The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and Enlightenment by Guy Spier
Albert Einstein, Atul Gawande, Benoit Mandelbrot, big-box store, Black Swan, Checklist Manifesto, Clayton Christensen, Daniel Kahneman / Amos Tversky, Exxon Valdez, Gordon Gekko, housing crisis, information asymmetry, Isaac Newton, Kenneth Arrow, Long Term Capital Management, Mahatma Gandhi, mandelbrot fractal, Nelson Mandela, NetJets, pattern recognition, pre–internet, random walk, Ronald Reagan, South Sea Bubble, Steve Jobs, winner-take-all economy, young professional, zero-sum game
In each case, we had to work out why they had happened and if there was a cause that we should have seen beforehand. Sometimes I would look back at a situation where I had missed some vital clue, shake my head, and say, “How did I not see that?” Mohnish added his own mistakes to the mix. We combined these with some (infrequent) errors that we had seen Buffett and Munger make, including their investments in NetJets, Dexter Shoe Company, and Diversified Retailing—a reminder that retail is a tougher place to make money than most people realize. Buffett, with characteristic candor, confessed in his 2007 letter to shareholders: “To date, Dexter is the worst deal I’ve made. But I’ll make more mistakes in the future—you can bet on that. A line from Bobby Bare’s country song explains what too often happens with acquisitions: ‘I’ve never gone to bed with an ugly woman, but I’ve sure woke up with a few.’”
The Alpha Masters: Unlocking the Genius of the World's Top Hedge Funds by Maneet Ahuja, Myron Scholes, Mohamed El-Erian
activist fund / activist shareholder / activist investor, Asian financial crisis, asset allocation, asset-backed security, backtesting, Bernie Madoff, Bretton Woods, business process, call centre, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, en.wikipedia.org, family office, fixed income, high net worth, interest rate derivative, Isaac Newton, Long Term Capital Management, Marc Andreessen, Mark Zuckerberg, merger arbitrage, Myron Scholes, NetJets, oil shock, pattern recognition, Ponzi scheme, quantitative easing, quantitative trading / quantitative ﬁnance, Renaissance Technologies, risk-adjusted returns, risk/return, rolodex, short selling, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, systematic trading, zero-sum game
Photo credit: Nadirah Zakariya Garry Kasparov (left), former world chess champion, and Boaz Weinstein (right), founder of Saba Capital, play a consultation game in the Hudson Square Ballroom in New York, May 17, 2010. Many leading investors, like Weinstein, are recognized experts in chess, and say an affinity for the game is favored in hiring as games of strategy mirror the strategy of financial decision-making. Photo credit: (c) Hiroko Masuike/The New York Times/Redux Boaz Weinstein (center) alongside Warren Buffett (far left) at the NetJets First Annual Poker Championship in June 2005. Photo credit: Boaz Weinstein
Exponential Organizations: Why New Organizations Are Ten Times Better, Faster, and Cheaper Than Yours (And What to Do About It) by Salim Ismail, Yuri van Geest
23andMe, 3D printing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, augmented reality, autonomous vehicles, Baxter: Rethink Robotics, Ben Horowitz, bioinformatics, bitcoin, Black Swan, blockchain, Burning Man, business intelligence, business process, call centre, chief data officer, Chris Wanstrath, Clayton Christensen, clean water, cloud computing, cognitive bias, collaborative consumption, collaborative economy, commoditize, corporate social responsibility, cross-subsidies, crowdsourcing, cryptocurrency, dark matter, Dean Kamen, dematerialisation, discounted cash flows, disruptive innovation, distributed ledger, Edward Snowden, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, game design, Google Glasses, Google Hangouts, Google X / Alphabet X, gravity well, hiring and firing, Hyperloop, industrial robot, Innovator's Dilemma, intangible asset, Internet of things, Iridium satellite, Isaac Newton, Jeff Bezos, Joi Ito, Kevin Kelly, Kickstarter, knowledge worker, Kodak vs Instagram, Law of Accelerating Returns, Lean Startup, life extension, lifelogging, loose coupling, loss aversion, low earth orbit, Lyft, Marc Andreessen, Mark Zuckerberg, market design, means of production, minimum viable product, natural language processing, Netflix Prize, NetJets, Network effects, new economy, Oculus Rift, offshore financial centre, PageRank, pattern recognition, Paul Graham, paypal mafia, peer-to-peer, peer-to-peer model, Peter H. Diamandis: Planetary Resources, Peter Thiel, prediction markets, profit motive, publish or perish, Ray Kurzweil, recommendation engine, RFID, ride hailing / ride sharing, risk tolerance, Ronald Coase, Second Machine Age, self-driving car, sharing economy, Silicon Valley, skunkworks, Skype, smart contracts, Snapchat, social software, software is eating the world, speech recognition, stealth mode startup, Stephen Hawking, Steve Jobs, subscription business, supply-chain management, TaskRabbit, telepresence, telepresence robot, Tony Hsieh, transaction costs, Travis Kalanick, Tyler Cowen: Great Stagnation, uber lyft, urban planning, WikiLeaks, winner-take-all economy, X Prize, Y Combinator, zero-sum game
Apple & Foxconn) ( ) We emphasize agility - even mission critical functions are outsourced as variable costs rather than fixed costs 3) To what extent do you own vs. rent the assets in your organization?* ( ) We own all assets except peripheral equipment (e.g. copiers) ( ) We access some key equipment/services on demand (e.g. cloud computing) ( ) We use on-demand assets in multiple business functions (e.g. Hackerspaces or shared offices vs. leasing or buying office space; Using Netjet vs. buying a jet) ( ) We use on-demand assets even in mission critical areas (e.g. Apple & Foxconn) Community & Crowd 4) To what extent do you manage and interact with your Community (users, customers, partners, fans)?* ( ) We have very passive involvement with our community (i.e. we use some social media) ( ) We leverage our community for market research and other listening activities ( ) We actively use the community for outreach, support and marketing ( ) The community heavily influences our organization (e.g. product ideas, product development) 5) How do you engage your Community?
Too big to fail: the inside story of how Wall Street and Washington fought to save the financial system from crisis--and themselves by Andrew Ross Sorkin
affirmative action, Andy Kessler, Asian financial crisis, Berlin Wall, break the buck, BRICs, business cycle, collapse of Lehman Brothers, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Emanuel Derman, Fall of the Berlin Wall, fear of failure, fixed income, Goldman Sachs: Vampire Squid, housing crisis, indoor plumbing, invisible hand, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, Mikhail Gorbachev, money market fund, moral hazard, naked short selling, NetJets, Northern Rock, oil shock, paper trading, risk tolerance, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, savings glut, shareholder value, short selling, sovereign wealth fund, supply-chain management, too big to fail, value at risk, éminence grise
KDB was a national institution with what seemed to him to be a local charter. They had no business branching out with a risky international deal. “It’s like the Long Island energy utility trying to buy something in Russia,” he told Barancik. But they promised to do the best they could. Skip McGee, a forty-eight-year-old Texan, commuted to New York every week from Houston to run Lehman’s investment banking operations. He’d board a private plane using the firm’s NetJets account every Sunday evening around 7:30, land in New York around midnight, and take a car to his rental on the Upper West Side. Come Thursday night he’d be on a first-class flight back to Houston on Continental. McGee, a classic, old-school, back-slapping banker, was clearly ambitious. After graduating summa cum laude from Princeton and getting a law degree, he had spent nearly two decades at Lehman, first as a banker for wildcatters in the oil patch of his backyard and then moving up the ranks until he became the head of the entire investment banking division and joined Fuld’s vaunted executive committee.
They settled on setting up a meeting at 6:00 p.m. at the New York Fed. Geithner’s office wouldn’t start calling all the CEOs until just past 4:00 p.m., after the market had closed. The last thing they could afford was for news of the meeting to leak. Paulson, who usually made the trip to New York on US Airways, which offered a government discount—Wendy had always given him grief about flying in a private jet—arranged to charter a plane to New York, using his NetJets account. He couldn’t afford to be delayed; the matter at hand was too important, and the weather was atrocious. If anything, he was worried the plane wouldn’t even be able to take off. As they sped toward Dulles to catch the flight, Paulson, almost inaudibly, said, “God help us.” CHAPTER FOURTEEN Lloyd Blankfein was milling about the greenroom at the Hilton Hotel on Fifty-third Street at Sixth Avenue, waiting to make a speech at the Service Nation Summit, an annual conference coordinated by a coalition of nonprofits that promotes volunteerism in America.
The Sum of Small Things: A Theory of the Aspirational Class by Elizabeth Currid-Halkett
assortative mating, back-to-the-land, barriers to entry, Bernie Sanders, BRICs, Capital in the Twenty-First Century by Thomas Piketty, clean water, cognitive dissonance, David Brooks, deindustrialization, Deng Xiaoping, discrete time, disruptive innovation, Downton Abbey, East Village, Edward Glaeser, en.wikipedia.org, Etonian, Geoffrey West, Santa Fe Institute, income inequality, iterative process, knowledge economy, longitudinal study, Mason jar, means of production, NetJets, new economy, New Urbanism, plutocrats, Plutocrats, post scarcity, post-industrial society, profit maximization, Richard Florida, selection bias, Silicon Valley, The Design of Experiments, the High Line, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, Thorstein Veblen, Tony Hsieh, Tyler Cowen: Great Stagnation, upwardly mobile, Veblen good, women in the workforce
For starters, the rich have always spent more than everyone else on inconspicuous consumption, and less on conspicuous consumption than they do on education, child care, tuition, SAT courses, political contributions, and other nonvisible spending, but this trend has significantly increased in the Recession aftermath.25 While the top income groups tended to spend essentially the same on conspicuous and inconspicuous consumption pre-2007, after the crisis their consumption habits changed significantly, with huge drops in conspicuous consumption after the crisis, followed by a slight uptick but never returning to previous levels from 2008 onward. As the economist Robert Frank observes, with the outcry over inequality in full swing, public hedonism and overt luxury spending have become flashpoints in the debate (which is not to say they aren’t spending money), and thus those in top income groups find new channels for their money that are known only to those in their circles (whether it’s a live-in housekeeper or, for the very rich, NetJets to Art Basel Miami).26 Conversely, the middle class, those in the 40th to 60th percentile income bracket making on average $47,000 a year, are returning to their pre-Recession conspicuous consumption behavior while reducing their spending on inconspicuous consumption in the post-Recession period. Historically, they have always spent significantly more on conspicuous expenditures than inconspicuous consumption, and at the height of the financial crisis barely reduced their spending on clothes, watches, cars, and other Veblen goods (see fig. 3.1).
SUPERHUBS: How the Financial Elite and Their Networks Rule Our World by Sandra Navidi
activist fund / activist shareholder / activist investor, assortative mating, bank run, barriers to entry, Bernie Sanders, Black Swan, Blythe Masters, Bretton Woods, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, commoditize, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversification, East Village, Elon Musk, eurozone crisis, family office, financial repression, Gini coefficient, glass ceiling, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, John Meriwether, Kenneth Arrow, Kenneth Rogoff, knowledge economy, London Whale, Long Term Capital Management, longitudinal study, Mark Zuckerberg, mass immigration, McMansion, mittelstand, money market fund, Myron Scholes, NetJets, Network effects, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, plutocrats, Plutocrats, Ponzi scheme, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, rolodex, Satyajit Das, shareholder value, Silicon Valley, social intelligence, sovereign wealth fund, Stephen Hawking, Steve Jobs, The Future of Employment, The Predators' Ball, The Rise and Fall of American Growth, too big to fail, women in the workforce, young professional
The CEO of Deutsche Bank has historically had extraordinary standing and gravitas in Germany, since the public views the institution as a reflection of Germany itself and its CEO as its fiduciary. Throughout his tenure, however, Ackermann remained controversial. Ackermann had always been a power broker who successfully placed himself in the center of relevant networks and crucial events. Wherever the financial elite congregated, he was sure to be in their midst. He spent so much time in the air that he became one of NetJets’ top ten fliers in Europe. Due to his superhub position at the core of financial, economic and political networks, he achieved his greatest power at the pinnacle of the financial crisis. As Chancellor Merkel’s confidante and finance minister Peer Steinbrück’s adviser, his status morphed from that of mere banker to quasi-statesman. By virtue of his chairmanship of the International Institute of Finance, he became the unofficial ambassador of financial institutions globally.
Frenemies: The Epic Disruption of the Ad Business by Ken Auletta
Airbnb, barriers to entry, Bernie Sanders, Boris Johnson, Build a better mousetrap, Burning Man, call centre, carbon footprint, cloud computing, commoditize, connected car, corporate raider, crossover SUV, disintermediation, Donald Trump, Elon Musk, forensic accounting, Google Glasses, Internet of things, Jeff Bezos, Khan Academy, Lyft, Mark Zuckerberg, market design, Menlo Park, move fast and break things, move fast and break things, Naomi Klein, NetJets, Network effects, pattern recognition, pets.com, race to the bottom, Richard Feynman, ride hailing / ride sharing, Saturday Night Live, self-driving car, sharing economy, Shoshana Zuboff, Silicon Valley, Snapchat, Steve Ballmer, Steve Jobs, Tim Cook: Apple, transaction costs, Uber and Lyft, uber lyft, Upton Sinclair, éminence grise
Or sometimes he wants us to sponsor one of his events, and he’ll call me up and tell me, ‘John [Wren, CEO of Omnicom] and Martin [Sorrell] are going to do it. Are you going to?’ Then he calls John and Martin and says ‘Roth is going to do it.’ Then we’ll all meet at the event and say, ‘Why the fuck are we doing this?’” One gets a sense of Michael Kassan, connector, watching him confer with his chief of stuff, Martin Rothman, on the leased six-seat NetJet as it leaves Miami after a 4A’s conference in April 2016. They review a draft presentation he had dictated and the staff honed, which he’s to present to a client the next day, suggesting how the client should market itself and what new media efforts it should undertake. “One of the questions the client asked,” Kassan says, “is how do we benchmark against what our competitors are doing?” He smiles.
The Messy Middle: Finding Your Way Through the Hardest and Most Crucial Part of Any Bold Venture by Scott Belsky
23andMe, 3D printing, Airbnb, Albert Einstein, Anne Wojcicki, augmented reality, autonomous vehicles, Ben Horowitz, bitcoin, blockchain, Chuck Templeton: OpenTable:, commoditize, correlation does not imply causation, cryptocurrency, delayed gratification, DevOps, Donald Trump, Elon Musk, endowment effect, hiring and firing, Inbox Zero, iterative process, Jeff Bezos, knowledge worker, Lean Startup, Lyft, Mark Zuckerberg, Marshall McLuhan, minimum viable product, move fast and break things, move fast and break things, NetJets, Network effects, new economy, old-boy network, pattern recognition, Paul Graham, ride hailing / ride sharing, Silicon Valley, slashdot, Snapchat, Steve Jobs, subscription business, TaskRabbit, the medium is the message, Travis Kalanick, Uber for X, uber lyft, Y Combinator, young professional
When I finish a project, I aspire to feel full. And when I lay dying, I hope to look back on what I would consider a full life. NEVER BEING FINISHED Continuing to learn is an elixir to life. As I write, Warren Buffett is eighty-seven years old and still regarded as one of the greatest investors alive: His company, Berkshire Hathaway, holds more than $600 billion in assets and wholly owns companies like GEICO, NetJets, and Dairy Queen, and is among the largest owners of American Express, Apple, Coca-Cola, and Wells Fargo, among many other companies. His annual letters to investors in Berkshire Hathaway help us understand what keeps him at the forefront of his industry. After reading just a few of these letters, a couple of things stand out. For starters, Buffett is remarkably self-reflective and self-deprecating, often calling purchases and decisions he made “dumb” and repeatedly stating that he was wrong, has “no magic plan,” or struggles to understand something.
The Wright Brothers by David McCullough
At Le Mans, Marc Denoueix, an authority on the importance of Wilbur Wright’s performances there, and at Pau, Paul Mirat, no less an expert on that part of the story, provided tours as fine as one could wish for. I appreciated also the chance to talk with a senior member of the famous Bollée family of Le Mans, Gerard Bollée, and to have been treated to a tour of the noted Automobile Museum at Le Mans by François Piquera. And again, thanks, too, to Captain Nicole Sammels of NetJets. I’m grateful also to the Medina County Library and the Medina County Historical Society in Ohio, and the Camden Public Library and the Owls Head Transportation Museum in Maine, Judy Schiff of the Sterling Library at Yale, and Melissa Cronyn and Miles Barger of the U.S. National Park Service. I salute my old friend and literary agent, Mort Janklow, and sing his praises still again for providing sound advice and the kind of enthusiasm that keeps the batteries charged.
Dark Towers: Deutsche Bank, Donald Trump, and an Epic Trail of Destruction by David Enrich
Affordable Care Act / Obamacare, anti-globalists, Asian financial crisis, banking crisis, Berlin Wall, buy low sell high, collateralized debt obligation, commoditize, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Donald Trump, East Village, estate planning, Fall of the Berlin Wall, financial innovation, forensic accounting, high net worth, housing crisis, interest rate derivative, interest rate swap, Jeffrey Epstein, London Interbank Offered Rate, Lyft, Mikhail Gorbachev, NetJets, obamacare, offshore financial centre, post-materialism, Ralph Waldo Emerson, Renaissance Technologies, risk tolerance, Robert Mercer, rolodex, sovereign wealth fund, too big to fail, transcontinental railway, yield curve
When they ran it through an X-ray machine, they spotted what looked like shrapnel. Police and a bomb squad rushed over, their sirens screaming. Inside the envelope was a small explosive device, sent by an Italian anarchist group. An accompanying letter attacked “banks, bankers, fleas, and bloodsuckers.” Like Abs and Herrhausen before him, Ackermann had assumed the mantle of statesman. He traveled the world on a private NetJets plane, dining with world leaders including Vladimir Putin and George W. Bush—not to mention a who’s who of European politicians and royals. With Europe now in its own financial crisis, and entire countries like Greece and Ireland falling apart, Ackermann had become a sort of shadow finance minister for the entire continent. Germany was Europe’s most powerful country, dictating bailout terms for failing nations, and it was Ackermann to whom Germany’s chancellor, Angela Merkel, regularly turned for financial advice.
Uneasy Street: The Anxieties of Affluence by Rachel Sherman
American ideology, Bernie Sanders, Capital in the Twenty-First Century by Thomas Piketty, deindustrialization, Donald Trump, estate planning, financial independence, gig economy, high net worth, income inequality, Mark Zuckerberg, McMansion, mental accounting, NetJets, new economy, Occupy movement, plutocrats, Plutocrats, precariat, school choice, sharing economy, Silicon Valley, Steve Jobs, The Spirit Level, Thorstein Veblen, transaction costs, upwardly mobile, We are the 99%, women in the workforce, working poor
Having lived in New York for years, I knew the differences among neighborhoods in Manhattan and Brooklyn and something about jobs in finance (and much more, of course, about those in academia and nonprofits). Surely there were more issues that I might have tripped over if I had not been from the same background, but these were invisible to me. Some of this implicit knowledge became explicit when my research assistant was unfamiliar with certain luxury goods and services, such as NetJets, the private airplane rental service. Transcribers likewise lacked certain referents of elite consumption and education, such as—to take four examples that came up in a single interview—Chippendale furniture, RISD (the Rhode Island School of Design), Hermès, and Groton (an elite boarding school). I did try to signal my own cultural capital in these areas, to avoid the possibility that interviewees would construct me as too far outside their worlds.
Boom: Mad Money, Mega Dealers, and the Rise of Contemporary Art by Michael Shnayerson
activist fund / activist shareholder / activist investor, banking crisis, Bonfire of the Vanities, corporate raider, diversified portfolio, Donald Trump, East Village, estate planning, Etonian, high net worth, index card, Jane Jacobs, mass immigration, NetJets, Peter Thiel, plutocrats, Plutocrats, rent control, rolodex, Silicon Valley, tulip mania, unbiased observer, upwardly mobile, Works Progress Administration
He liked checking in early at Les Trois Rois; he felt it gave him a head start. Space at the hotel was so tight that Gagosian’s entourage had to sleep elsewhere: only the king got a room at the Three Kings. Most other dealers would arrive on Monday, a day before the fair’s coveted VIP opening. A few, like silver-haired blue-chip dealer Bill Acquavella, would arrive in their own planes. Others would descend at Basel’s EuroAirport in NetJets filled with collectors and money, like an art world air force. Many dealers had sent images of works from their fair inventories to clients, and many of those works had been put on reserve. Some 35 years before, Gagosian had earned scorn in SoHo for showing photographs or transparencies of paintings that weren’t always his to sell. There wasn’t anything illegal about that, nor was he the first to do it.
Extreme Money: Masters of the Universe and the Cult of Risk by Satyajit Das
affirmative action, Albert Einstein, algorithmic trading, Andy Kessler, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, business cycle, capital asset pricing model, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, Fall of the Berlin Wall, financial independence, financial innovation, financial thriller, fixed income, full employment, global reserve currency, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, happiness index / gross national happiness, haute cuisine, high net worth, Hyman Minsky, index fund, information asymmetry, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, job automation, Johann Wolfgang von Goethe, John Meriwether, joint-stock company, Jones Act, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Martin Wolf, mega-rich, merger arbitrage, Mikhail Gorbachev, Milgram experiment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, Naomi Klein, negative equity, NetJets, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, Paul Samuelson, pets.com, Philip Mirowski, plutocrats, Plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, quantitative easing, quantitative trading / quantitative ﬁnance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Thaler, Right to Buy, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, Satyajit Das, savings glut, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, survivorship bias, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond, zero-sum game
Very, very few people could appreciate the bubble.... Rising prices are a narcotic that affect the reasoning power up and down the line.16 He did not acknowledge any failure or complicity of the agencies in creating the bubble. When Goldman Sachs was indicted for alleged violations in structuring and selling CDOs, Buffett, a major investor in Goldman, defended the firm, its actions and its CEO. In 2011, David Sokol, the CEO of Netjets, a company in which Buffett had a significant shareholding, resigned. Sokol had been a candidate for succeeding Buffett at Berkshire Hathaway. Sokol’s resignation came after disclosure of his purchase of Lubrizol shares before Berkshire bought the chemicals company, netting him a $3 million personal profit. Buffett initially defended Sokol’s actions arguing that the purchases were not unlawful.