I recently picked up Rob Carrick’s new book “Rob Carricks’s Guide to What’s Good, Bad and Downright Awful in Canadian Investments Today“.  For those of you who aren’t familiar with Rob Carrick, he is the top personal finance journalist in Canada.  You can read his articles in the business section of the Globe and Mail.

This book is excellent.  It covers all the topics you need to get started in investing such as how to find a financial advisor, how to do your own investing, recommended discount brokerages, various financial products to buy or avoid and much, much more.  Rob writes with a very casual, easy to read style and explains everything in very clear terms.

I have to admit when I bought the book, I thought that:

• It was strictly for beginners.
• I wouldn’t learn anything, because I know everything already. 

While this book is perfect for someone who doesn’t know much about investing, it contains a ton of information, and I would challenge any other self-proclaimed “experts” out there to read this book and not learn at least a few things.  As it turns out, I learned quite a bit of useful information.

What kind of investor should read this book?

The book is aimed at the bookshelf of a beginner to intermediate investor.  Advanced investors will learn a few things, but might want to get the book from the library.  I am keeping my copy for future reference by the way.

What was good about this book?

• No punches pulled.  In the intro, Rob states that he doesn’t hold back and he wasn’t kidding – he has lists of the worst mutual funds and scathing criticism of the investment industry, especially the idea that advisors are acting on behalf of their clients.  I was impressed, considering that most of the companies he named, probably buy advertising in the Globe and Mail.
• Complete.  The book covers all the investing topics that are necessary for most investors.
• Uses examples.  He doesn’t just talk theory – he lists specific examples of investing products to buy and avoid ie specific mutual funds and ETFs.  Rob is clearly a big dividend stock fan and lists quite a few recommended dividend stocks.

What was bad and downright awful about this book?

The fact that Money Smarts Blog wasn’t listed in the “good investing blogs” list! 

Truth be told, MSB hasn’t been doing many investing topics lately.  This will be changing in September.

What else has Rob published?

He has also written another book called “How to Pay Less and Keep More For Yourself: The Essential Consumer Guide to Canadian Banking and Investing“.  I’ll be reading this book in the near future.  It’s a few years old, so I might just see if the library has it.

Have you read this book?  What did you think?

There are a few books that are beloved and can be a bit dangerous to review.  YMOYL is the bible to a number of people, so I’ll start with saying that I think there’s a lot of good stuff in there, it’s a solid book and just about everyone should read it.  In spite of this, I think there are some major weaknesses in it.

Overview

Joe Dominguez was a Wall Street Analyst who developed a program to retire at age 30, then started teaching a course (and eventually wrote this book) to help others do the same.  Since he passed away in 1997, his co-author Vicki Robin and a new collaborator Monique Tilford have continued updating the book and “spreading the gospel”.

The core of the book is the idea that their is a point of “enough” where your needs and reasonable desires are met and the law of diminishing returns kicks in:  you enjoy each little bit extra less.  They present a plan to identify this point of fulfillment, bring your spending and earning in line with it, and eventually retire early with investment income providing what you need while you devote your life to what you really want to do (instead of whatever you feel forced to do right now).

Apparently “The Complete Tightwad Gazette” author Amy Dacyczyn took their course and it was part of the lifestyle change she followed which led to her excellent newsletter (I actually recognized her from an example in the book where she was just identified as “Amy D.”, then later they made reference to her full name and newsletter.

Specific Strategies

How they recommend getting to this point is the core of the book, and in my opinion what REALLY shines.  Basically they suggest figuring how much you’ve earned in your lifetime (more on this later), your networth, and tracking your income and spending.  From here, they get you to figure out what your REAL hourly pay rate is after you’ve accounted for all the associated costs with your job such as work wardrobe, commuting or buying beers at the pub to decompress.  Combining these two, you see what your spending is on various items in terms of your time (e.g. you might be spending 30 hours of “life energy” every month on rent).  For all your spending, they advocated deciding if your spending is in-line with your values or not, and suggest making changes in areas where it is not.  They advocate maintaining a wall chart where you track this from month-to-month, as well as your investment income, and as a trend line becomes clear, estimate when you can quit your job and do what you really want with your life.

Mixed Philosophies

I think the strategies they present are EXCELLENT, but mixed in with them are some extra world views such as sustainable living, environmentalism, anti-consumerism and anti-capitalism.  I don’t particularly have a huge problem with any of these (I have friends in each of these camps), but they’re all tangential to the core of the book and I would have preferred if the authors had stayed a bit more focused.

Much like Dave Ramsey forces you to take Christianity with your debt-reduction advice, I think the authors are using readers’ interest in getting control of their money to force these other views on them.  Again, it’s fine to be a member of a specific faith or to be an environmentalist, but there are a large number of secular people who are interested in reducing their debt and there are a large number of people with other world views who are interested in getting control of their spending.

It seemed like all of their examples were people who followed this program then went on to get into hippie stuff.

Dogmatic

I found in a number of places it was their way or the highway.  You don’t get an explanation:  just do as you’re told.  The first step in their program is to determine ALL the money you’ve made in your entire life.  EVERYTHING.  They expect you to try to account for that 5 dollars you got for Christmas when you were 5 years old and that quarter you found on the street when you were 15.

When you do this step set your sights on impeccability – have you really searched your files and your memory banks for all your income?  Yes, you could settle for a “close enough” answer – but we suggest you go for the former, since the power of this program increases with every ounce of honesty and integrity you invest in.  Rounding to the $100 is looser, but over a lifetime that might be plenty.  Rounding to the $1,000….  well, people who do a halfheated job often get a life to match!

I almost stopped reading at that point.  I’ve worked most of my life (delivering flyers then newspapers then flipping burgers as I got older) and trying to estimate my lifetime earning to the nearest $100 would be an insane amount of work.  The only point to this exercise seems to be to develop a realization of how much money has gone through your hands.  For people who view $100,000 as unimaginable wealth, it makes it more concrete if they realize they’ve earned, and spent, this amount many times over in their life.

I disagree with them about the level of detail needed:  I think someone could complete this part of their program with a FAR, FAR rougher estimate then they insist on.

Focus on Your Strengths

They spend a whole chapter echoing the investment advice some friends have told them about, which seemed like another waste of space to me.  In the original version Joe Dominguez suggested buying treasury bonds exclusively.  In this version, they try to present a larger picture of investing and fail miserably.  I think they would have been far better off to suggest Joe’s approach as a start, and encourage readers to learn themselves about investing once they got to that point.

Final Words

Again, I REALLY love this book and think its focus on making specific measurements about your finances and using these measurement to enact change in your life is first rate.  The accounts of people’s lives who have followed the program are interesting and drive the points home.  I think there are some parts that could be streamlined to make it a better book, but in spite of this I heartily recommend it.

“Nudge:  Improving Decisions About Health, Wealth and Happiness” by Richard Thaler and Cass Sunstein is a book about how presenting choices in a different way can lead to widely differing proportions of people making each selection.  At the very beginning they present an experiment where a nutritionist running cafeterias wanted to provide student with the full range of options, but encourage them to make healthier choices.  She found that simply by having carrot sticks (or a similar nutritious item) FIRST in the line increased choice of these over options like french fries by 25%.

The rest of the book presents numerous case studies where, through actions as simple as the order food is presented in a cafeteria line, the choices GROUPS of people make can be massively swayed.  They don’t make any claim (or express any desire) to change the decision of one person.  Instead their focus is on shifting the number of people from choosing one option to another.

Another example they gave is the default choice (what people are assigned to if they don’t choose anything).  In most situations, regardless of how important the decision is, the default choice will get a disproportionate number of people selecting it (a number won’t get around to making a choice and will just leave it as is).

This has always made me angry in the university environment.  At both schools that I’ve attended there were a number of “optional” fees that were charged to your account, then you were given a window of time to submit paperwork to get your money back.  Even if someone got a refund every term, the next term the funds would be automatically be deducted from their account and they would have to take action to get them back (again).  The people running the show wanted to benefit from the default option (leaving the cash in their pockets, not yours).

A running theme in the book is contrasting what they call Econs (think ultra-rational decision makers like Mr. Spock on “Star Trek”) with Humans (think Homer Simpson on “The Simpsons”).  Many policies are designed for Econs, then all us Humans make choices that are bad for us.

This was one of the most dense economics-style books I’ve read in a while, and it took me a bit longer to work through than most books do.  It was very well cited and provides a lot of information, but someone picking it up should realize that they’re getting something closer to a textbook than a pleasure read.

At the end of the book they summarize that the book is about two things, choice architecture (offering choices such that people have the full range of options but will be pushed towards one option) and what they call “paternal libertarianism”.  By this they mean, offer the full range of choices (libertarianism), but use the power to push towards the option that best helps people (paternalism).  I found this element of the book (if sincere) quite naive.  People architecting choices will, as I’ve seen at my universities and every other situation I can think of, “nudge” people in the direction that’s best for the NUDGER, not the NUDGEE.  I’m certain the people setting up the fee structures at my universities had rationalizations for what they’d done, just as I’m sure businesses and governments can easily rationalize “Nudges” they put in place for their own benefit.

I wonder if the authors introduced this element to the book just so they wouldn’t be accused of writing a Machiavellian book on ways to control groups of people (which, make no mistake, this is in part).

Overall I greatly enjoyed this book.  If you’re at all involved in determining how choices are offered to people (even by something as simple as designing a form, being in sales or administering a company benefit plan) this is a book that is well worth reading.  If you find the general ideas enticing, I think this is a solid book with some good meat to it.  Consumers are certainly being manipulated by techniques detailed in it (and have been since LONG before it was published), so if you’re the type of person who doesn’t like being pushed into a decision, it’s probably also worth reading just so you’ll be more aware of ways this is done to us.

To order this book:

I’ve seen almost every Michael Moore documentary.  I like his movies and I like his persona (he seems like he’d be a lively guest at a dinner party).  I certainly don’t agree with all his politics (but, then, I can’t think of anyone I *do* agree with all their politics).  Recently Preet did an interview with the man himself (which was quite exciting) and it reminded me to watch this.

I tend to assume that it’s easy to tell when I’m joking (although I realize, intellectually, that it’s not), and I think Michael Moore has an element of this.  Often he portrays himself as a dumb hick from Flint, Michigan who just wants someone to explain all this to him.  After he’s sucked them into a discussion, he punches them when they aren’t looking.  It’s an amusing way to get some reality TV footage, but it comes at the expense of the people who never signed up to look foolish.  Sacha Baron Cohen and Brian Flemming also use a similar style, and in many ways on the opposite side of the spectrum Glenn Beck and Bill O’Reilly use the same sort of tactics.  In each case it can be hard to tell when someone is being serious and when they’re being facetious (and trying to draw their victim into making a fool of themselves).  Regardless of who does it, it’s amusing but pretty intellectually dishonest.

Early in the move Michael Moore asks people to explain derivatives and collateralized debt obligations (CDOs), which leads to humming, hawing, and incoherent explanations.  The first paragraph of the Wikipedia entry on the history of future exchanges explains what a derivative is, Moore could have easily whipped up a cartoon (set in ancient Greece) that would have explained it, but it’s better for his narrative if it’s presented as an incoherent evil.

On the face of it the movie sets out to show how the subprime meltdown proves that capitalism doesn’t work.  At the end of the movie, Michael Moore presents his views as honestly as I think he ever has when he sums it up as “Capitalism is an evil.  And you cannot regulate evil.  You have to eliminate it and replace it with something that is good for all people.  And that something is called democracy.”

I guess if capitalism is evil, that makes the Canadian Capitalist Canadian Evil (which is kind of cool!).

This conclusion comes from one piece of anecdotal evidence after another through the film.  There’s the poor farm couple whose house has been foreclosed on, the union shop that fires all its employees and closes it’s doors without paying them their final pay check, a few priests talking about how capitalism is unchristian, and the awful corporate special interest groups who have bought the presidency since Regan, manipulate congress and are going to be exorcised by the great Obama.

I share a number of Moore’s concerns (part of why I enjoy his movies I guess).  I think the level of corporate involvement at all levels of government is very troubling, but it’s strange to me that his solution is bigger government (which seems to just pass more money and power into their control).  I feel bad for people losing their houses or jobs, but I’m not convinced capitalism is to blame.

I found the Catholic priests kind of bizarre.  One of them says:

“The system has built into it what we call propaganda.  I’m in awe of propaganda — the ability to convince people who are victimized by this very system to support the system and see it as good.”

He’s talking, of course, about capitalism (huh?).  His statements would make A LOT more sense to me if he was talking about organized religion.

An important part of every Michael Moore film is when he heads out and makes a dick of himself with some poor security guards (who are earning their pay that day, let me tell you).  In this one he tried to make a citizen’s arrest of the entire board of directors at a number of banks, and then he wraps “crime scene” tape around some corporate headquarters.  Moore has even admitted that he feels bad for the people doing their jobs that he harasses, but feels the points he makes are worth putting them through it (“I do feel bad for them on one level. On another level, they’re the good Germans.“).

If you’ve enjoyed previous Michael Moore movies, you’ll like this one as well!  He’s getting a bit more extreme in his politics, but the choir he preaches to will be saying “hallelujah” and his critics will be frothing at the mouth (which is always amusing too).

Have you seen many Michael Moore movies?  Did you like them? Do you find his rhetorical style persuasive?

I loved the original Freakonomics book and was excited when I first saw that Levitt and Dubner had released SuperFreakonomics.  I received it as a late Christmas gift and tore through it in a couple of days.  From a high level, I’d say if you liked the first book, and are willing to read more of the same, you’ll like this one.

I used to have very romantic ideas about academia.  I imagined faculty were the intellectual elite who congregated to expand human knowledge, investigate the meaning behind everything and set aside the pretty bickering of lesser minds.  While very smart people tend to be around universities, often the research is incredibly derivative, following academic fashion closer than a supermodel follows clothing fashion.  Politics and petty bickering seems to be the focus of a pretty large portion of many academics’ time as well.  The two Freakonomics books follow this spirit of intellectual inquiry I’d hoped to find at universities:  the authors are smart, follow exciting work in economics, tie in current research to the human condition and challenges facing the human race and are able to politely and smoothly demolish objections made against the findings they present.
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In the first book they indirectly took a shot at Malcolm Gladwell when they ripped apart the “broken window” explanation Gladwell presents in The Tipping Point to explain crime reduction in New York city.  Gladwell offered what I found to be a somewhat lame counter-argument.  In this book they take a couple more shots at Gladwell.  They basically cast Outliers as one of three works based entirely on K . Anders Ericsson’s research (which is a fair criticism I’ve come across elsewhere).  They also present a novel (to me anyway) perspective on the Kitty Genovese murder which was an important part the The Tipping Point.  They touch on Atul Gawande’s “Better” and seem to have more respect for it than they do for Gladwell’s work.

One of my friends had said he “hated” SuperFreakonomics, and after reading it I asked him why.  His feeling was that the examination of the economics of prostitution was too similar to the examination of crack deals in the first book.  It was fair that they’re both detailed overview of the business behind illicit activities (and are based on work by the same economist), but I found them both fascinating.  His other complaint was that it was “too much of the same” as the first book, which is valid.  I view this as a positive, not a negative, myself.  His third criticism was that one big part of the book was how to catch terrorists using data mining, and they left out the final punchline in “the interests of national security”.  I agreed this was kind of anti-climatic (and they perhaps should have left this section out if they couldn’t provide all the details).

In the first book they rip into Realtors (showing pretty convincingly that most Realtors aren’t working as hard to get top dollar for properties as they claim to be).  In this book they ask who adds more value:  a pimp or a Realtor?  They compared houses sold by the owners (paying a $500 flat rate) to those sold using a Realtor (charging 5% of the sale price, $20,000 for a $400K house).  While they acknowledge possible confounds in the research, the findings were that houses sold for the same price with or without a Realtor.  The big difference was that they sold 20 days sooner if the Realtor was involved (and question how many people are willing to pay $20K to not live in their house for an extra 20 days?).  Pimps, in contrast, AFTER taking their 25% commission left prostitutes with a $85 HIGHER weekly salary than if they were working solo, and they slept with 1.6 LESS men each week.  Additionally, prostitutes without pimps were more likely to be beat up or forced to give “freebies” to gang members and police officers.

Other topics in the book include:  why current thinking on global warming isn’t productive, who terrorist are (rather than desperate, grubby people, they paint a picture of them as “super patriots”), how the introduction of television has helped women in India, an investigation into altruism (and how economic research supporting it was debunked), the (in)effectiveness of child car seats (for children above the age of 2), and whether its safer for a drunk to walk home or drive home.

Their book is well cited throughout, with footnotes directing interested readers to the original research studies this work is based on.  It may just be that I’ve read too many of this type of book, but I was already familiar with a number of the research projects they detailed (which somewhat stole the surprise of the “twist”).  If someone hasn’t read the first Freakonomics book I’d recommend reading it first, but SuperFreakonomics is just about as good.
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Malcolm Gladwell’s new book, “What the Dog Saw” is different from his previous books.  Whereas he took a core idea and expanded it to book length in Outliers, The Tipping Point and Blink, in this book he collects a number of articles he had previously written for “The New Yorker”.

A number of times I’ve complained to Mike about how under-utilized most blog’s archives are.  When someone finds a blog they like, it seems quite rare that they dig through the archives (instead they just start  reading the most recent posts, often missing some of the best stuff there).  My feeling was along these lines after reading this book:  Gladwell has published a lot of great stuff in The New Yorker and I should really dig through it more than I have (I’d only read two of his articles before this book).

The articles themselves covers a wide range of topics, such as ketchup (and how it delivers all five of the known fundamental tastes of the human palate), dogs (and how they’ve evolved to find humans VERY interesting), hair dye (and it’s connection to the evolving women’s rights movement), problems with interviews (and how this is seen in recruiting football quarterbacks), and how to deal with homelessness (in a way that will annoy everyone across the political spectrum).

At one point in the introduction, Gladwell discusses how annoyed he gets when someone talks to him about one of his articles and says “I don’t buy it”.  He writes that his intention isn’t to give the definitive last word, but to excite people about how interesting things like ketchup and hair dye are and get them thinking about some of the ideas that surround us every day.  This is exactly what I like about his books (and why I’m glad there there’s a number of authors imitating him):  the world can use more of this style.

Joel Spolsky writes some excellent posts on “Joel on Software“.  He is a former Microsoft programmer who created a company that is set up as “the type of place he would want to work”.  He treats his programmers very well, and has built a good company based on this idea.  One chapter in this book dealt with this idea (which I’ve always thought was a good one):  a company that gives its top talent a large degree of latitude.  At the company Gladwell discussed they would identify the “stars”, then give them resources for projects, let them work on things they found interesting, and pay them generous wages to keep them.  The CEO talked in one article about an employee who had, at 29, as a gas trader at the company set up an on-line trading division.  She worked in her spare time, and 6 months later, when the CEO first heard about the project, she had 250 people working for her, servers purchased and was ripping apart some of their buildings.  The CEO responded that this was “exactly the kind of behavior that will continue to drive this company forward”.  I would be tempted to agree that this is an exciting, dynamic way to create a pretty innovative company.  That company’s name, by the way, was Enron.  In another article he presents a pretty convincing case that at Enron the complexity got away from them, rather than it being deliberate fraud.

I think there’s certain information in this book that will be of interest to anyone who likes to read about personal finance topics.  Gladwell is always good at presenting a new perspective on issues (especially on irrational beliefs and behaviours), which I think is vital for investing.  His ideas about how we interact with each other and use products should be useful for anyone interested in human interactions or business.  One chapter, Blowing Up, deals specifically with two traders and their differing approaches to investing (one who tries to outsmart the market, and one who bets that the market will outsmart traders – guess who wins?).

There’s an introduction and SOME chapter have a short update at the end (if something big has changed since the article was written), but for the most part the book is a collection of his articles, so frugal fans could probably just read through his The New Yorker archive.

To read more reviews or to order this book:

I was surprised recently when the Canadian Capitalist posted a “first impressions” review of Derek Foster’s new book, “Stop Working too:  You Still Can!”  I was surprised because I’ve reviewed two of Derek’s previous books (Lazy Investor and Money for Nothing – which includes an interview) and have mentioned him favourably a number of times on the blog.  In spite of this, I wasn’t on his e-mail announcement or press release for the new book (and, worse, wasn’t offered a free review copy).  If you’re reading this Derek:  You hurt me.  You hurt me real bad.

Never one to let a simple obstacle like not getting a free copy force me to pay for a book, I camped out for a few hours at Chapters and read the new book there.  The table of contents isn’t posted on-line anywhere, and I don’t have a copy to refer to, but in spite of this I think I can give a decent overview.

The Canadian Capitalist hit the nail on the head with each of his first impressions from flipping through the book.  This book is focused on the fundamentals of personal finance, and does a good job conveying some of the basic principles.  Derek comes out entirely against debt, which I don’t agree with, but he’s in good company (Squawkfox and Dave Ramsey).  He presents some basic ideas for paying off your mortgage more quickly (such as negotiating for a better rate, switching to bi-weekly payments, adding small extra payments whenever possible, etc).  He comes out in favour of TFSA and gives an overview of this (fairly) recent new vehicle for retirement.

I was shocked when banks started trying to sell principal-protected notes, PPNs (and at a very expensive price).  Derek spends a chapter explaining how to roll your own, which has been covered elsewhere a number of times, but is useful for anyone who feels drawn to this investment vehicle.  He presents three possible 10-year scenarios (the entire stock market goes bankrupt, the stock market stays the same value and it goes up) and illustrates how an investor 100% in equities would fare compared to someone investing in PPN.  I somewhat felt that he should have gone to greater lengths to convey that the first two scenarios are VERY, VERY improbably.  As he lays it out, someone who isn’t reading carefully might infer that the three scenarios are equally likely and make a very poor investing decisions (get married to the “benefit” of PPNs).

Towards the end Derek presents an “advanced idea” of using an RRSP to move income to the next year when your going to drop to a lower income bracket (such as when you retire).  I talked to Mike about doing the exact same thing when I went back I went back to school (so it was kinda cool to read about an investment strategy I’d come up with on my own before), however I didn’t feel this was worth inclusion in what was already a pretty short book (this would be useful to a small number of people VERY infrequently during their life).

Derek defended selling his portfolio and continuing to promote his earlier “buy and hold forever” books.  I’ve never been as offended by this as other bloggers / readers were, but I didn’t think his justification would sway many of his critics.  As the Canadian Capitalist mentions, he also acknowledges the risk of option trading, which is a good thing (although he still recommends it as a strategy a little more broadly than perhaps he should).

I think Derek may have rushed this book to the printers a bit, as there were a number of glaring typos (send me an early review copy next time Derek and I’ll even proof read it for you!).

Overall, I think this is an interesting, introductory personal finance book targeting Canadians.  In many ways this book does a better job than any of his previous books for providing a broad perspective on Derek’s view of Canadian personal finance and his recommendations for everyday (would be) investors.

“Stop Working Too: You Still Can” can be purchased from Derek Foster’s website (http://stopworking.ca) or from most major book chains.

A friend gave me a copy of “The Alchemist” by Paulo Coelho and it’s one of the few books that I’ve liked well enough to keep in my personal library (I move a lot, so I try to keep the weight to a minimum). I’m not usually into “personal motivation” style books, however this book is the odd exception that I greatly enjoyed it (and have re-read it a couple of times and loaned it to friends).

The book centers on the shepherd Santiago, who has happily tended his flock of sheep and felt quite content for the lifestyle he has chosen. One night he dreams of a treasure buried at the base of the pyramids. Unsure what to do with this information, he eventually embarks on a quest to find this treasure (his personal legend) and encounters a host of people who help him, hinder him and provide insight on his journey.

As an allegory, the book explores the author’s views on the meaning and purpose of life, and how we get sidetracked from doing what we truly desire (and value). At one point he meets a Muslim man who has dreamed of traveling to Mecca his entire life, but has always found excuses why not to go. Eventually, after his interactions with Santiago, the Muslim man realizes that he has not gone to Mecca because he fears realizing his life’s dream, and losing his reason to live:

“Because it’s the thought of Mecca that keeps me alive. That’s what helps me face these days that are all the same, these mute crystals on the shelves, and lunch and dinner at that same horrible cafe. I’m afraid that if my dream is realized, I’ll have no reason to go on living.

“You dream about your sheep and the Pyramids, but you’re different from me, because you want to realize your dreams. I just want to dream about Mecca. I’ve already imagined a thousand times crossing the desert, arriving at the Plaza of the Sacred Stone, the seven times I walk around it before allowing myself to touch it. I’ve already imagined the people who would be at my side, and those in front of me, and the conversations and prayers we would share. But I’m afraid that it would all be a disappointment, so I prefer just to dream about it.”

Other characters have similar obstacles that prevent them from pursuing what they desire in life. Conversely, some characters are in pursuit of their personal legends, and their interactions with Santiago help them both on their journeys (he meets an Englishman trying to learn how to turn lead to gold, and falls in love with a woman whose personal legend was to find and love him).

Other concepts include paying to pursue our legends (he promises a gypsy 1/10th of his treasure to interpret his dream, and gives a king 1/10th of his flock of sheep for information about how to find his treasure. Between them they teach that everything in life has its price.

Allegorical Structure

This book probably wouldn’t have worked if it was presented as a literal guide to getting what you want in life.  I’m not sure if this is a good thing or a bad thing.  Perhaps the structure gives the impression of meaning to ideas that are tired clichés?  Perhaps it is the best vehicle to convey ideas about universal human experiences – as soon as you become concrete, you lose the ability to convey your ideas to some readers?  I have trouble pulling out specific strategies that I got from the book, and I’ve been hard in past reviews on other books that are short on specifics.  This book did a good job of getting me reflect about what I want to do in life and what’s holding me back from doing it (conveying knowledge and a fear of failure respectively for the record).

How To Get It

The author doesn’t mind having his books pirated, however he doesn’t own the copyright for foreign translations (the original is in Portuguese) so you can decide for yourself if you’re comfortable finding and downloading a copy.  It’s a very fast and easy read, and while some of the ideas are quite meaty, it’s digestible at multiple levels.

In your heart of hearts, what do you think you should be doing with your life?  Or, if you don’t mind the theological overtones, what do you think is the purpose of your life?  If you’re not actively pursueing this, what’s holding you back?

To order this book:

I recently finished Atul Gawande’s “Better” and found it interesting and relevant to the personal finance world.

Dr. Gawande is a practising surgeon and in this book discusses how to improve (get “better”) as an individual, organization and industry.  He uses medicine as the domain of discussion, but manages to generalize his insights to universal ideas and approaches (or at least presents them clearly enough that it’s easy to “translate” them to your own life).

The book is made up of three parts (diligence, doing right and ingenuity) each of which is broken into 3 chapters.  Each chapter explores a different domain in medicine and illustrates where the field could do better and an example of a practitioner who is doing so.

As an example, the first chapter talks about how infections spread WITHIN hospitals, and how often doctors unintentionally spread these infections (going from patient to patient without properly sanitizing in between).  He discusses this from a historical perspective (when the first doctor realized that washing up before surgery was important) and how it’s still a problem today.  He discusses how many times they’ve tried different approaches to get hospital staff to be more diligent about hand washing and how each approach has failed.  The approach that SEEMS to have worked was undertaken at a Pittsburgh veterans hospital.  Inspired by research into malnutrition in developing regions, instead of dictating a new “approach” to sanitation at the hospital, they began organizing groups where they would ASK the hospital staff how they could reduce infections, identify employees who had been most successful at avoiding infections and helped them communicate good ideas to the rest of the staff, published the best and posted the results on a month-to-month basis.  They’ve managed to get the MRSA wound infections (the one responsible for most deaths in hospitals) down to 0.

Extrapolating an idea like this to an organization (or family) that keeps struggling with a well defined problem would be fairly straightforward.  Talk to the people involved and ask them why a problem keeps happening.  Ask them for suggestions on how to improve it.  Publish the results.  Repeat until you hit the desired outcome.

The other 8 chapters are along the same lines, talking about:  fighting infectious diseases, how mobile military surgical units work, patient nudity during examinations, malpractice lawsuits, doctor’s salaries, medical personnel involved with executions, when to let a patient die, the benefits  (and drawbacks) of using a metric to measure your success, where you are on the bell curve of performance (and how to move toward the higher end), and how to not use difficulties as an excuse to not perform (and instead work around them).

I was particularly impressed by the author’s willingness to acknowledge the other side of issues (such patients suing their doctors or participating in executions).  He was able to state his opinion, yet still express the other viewpoints in a respectful manner, admitting which arguments did support the other side.  His suggestions, taking these into account seemed very well thought out and reasonable.

One thing he doesn’t discuss is when it makes sense to focus on improvement.  With medicine as your domain, HOPEFULLY the view is that it’s always good to be better (people’s lives are at stake after all).  If you look at his ideas in the context of your own life, it’s a judgement call when its worth focusing on getting better and when it isn’t.  As an example, Mike is good at what he does for a living, but it isn’t the core of his identity.  If he was going to focus on “improving” his career it’s going to come at the expense of his homelife or his blogging empire.  He has the three balanced in a way that works for him, and most of the ideas from this book would only be relevant if he was trying to shift his focus more heavily to one area (e.g. say he wanted to pull back to part time at work and spend more time blogging).  There is a cost to improvement (which the author acknowledges in passing, but dismisses as the stakes in medicine are so high).

I would certainly recommend this book, both as an interesting read and as something that might give you ideas on how to get better at something that is important to you.  Where Malcom Gladwell’s Outliers focuses on performance from a high level perspective (put 10,000 hours into something and you’ll get good at it), this book focuses on a similar issue but close up to the problems and dealing with immediate concerns.

“Sway” by the brothers Ori and Rom Brafman is about “the irresistible pull of irrational behavior”.  It was passed along to me after a friend enjoyed it and thought I would as well (which I did).  It’s a fast, easy read in the style of a Malcolm Gladwell book or Freakonomics.  The authors talk about the many reasons why we do irrational things, from both anecdotal and research-based perspectives.

As an example of the type of ideas it covers, they consider NBA draft picks.  While it isn’t a perfect system (Michael Jordan, considered by some to be the best basketball player of all time, was the 3rd pick in his draft year), drafting players is an important part of putting together a competitive team.  Researchers found that players’ draft selection order pick was the variable most responsible for their court play time.  So even if one player objectively outplayed another, if the weaker player was picked earlier in the draft they tended to get more time playing (and also tended to have a longer career).  They call this diagnosis bias, where we find it hard to shake an initial assessment of a person or situation, even after we get objective evidence that we were mistaken.  The halo effect is another description of the same phenomena.

The rest of the book is set up in a similar way.  There’s an engaging story (such as a plane crash, cultural effects on “Who wants to be a millionaire?” or Ferris Bueller), they point out the irrationality of the behaviour in the scenario, cite research into that area, and sometimes offer a counter to it.

One of the suggestions that seemed very reasonable to me is a better approach to hiring employees.  They make a convincing case that the unstructured interview (where the hiring manager chats with the potential employee to figure out if they’d be a good fit at the company) is a very bad way to evaluate if someone will be a good employee or not.  They suggest that instead you select your employees using aptitude tests.  For those who are most successful, use the “interview” to sell them on the company (and get them to agree to come work for you).

In Malcolm Gladwell’s books he fits interesting tidbits into a larger model he develops over the course of the book.  In Freakonomics they jump around unconnected, but interesting, facts and domains.  This book, in between the two, wasn’t executed as well.  While each element was connected to irrational behavior, it was hard to connect the ideas beyond that (and anyone could fill a book with anecdotes about irrational behaviour).  I kept hoping there’d be a higher level insight that evolved, but there wasn’t.

At the beginning of each chapter they give an obfuscated summary of the ideas to be presented (e.g. the preface was “Little house on the Tel Aviv prairie -> Asbestos and open-heart surgery -> Ignoring the O-ring -> Diagnosing the wrong patient -> Where psychology and business collide”).  I thought this was a clever way to capture the reader’s attention (and you had an “a-ha” moment when you got to that part and understood what “Little house on the Tel Aviv prairie meant”).  I wondered if maybe the authors mapped out the book using bullet points for the ideas then decided to keep their framework to hook the reader.

There are certainly elements of this book that are very relevant to personal finance.  For example, it talks in one place about continuing to hold a stock as it drops to $0.  However, I’d recommend this more as a pleasure read than something that will make you a better investor.