A publishing rite at this time of year is for sites far and wide to offer their own recommended “Best Summer Reading” lists.
For all things there’s a first, so here is Adam Smith, Esq.’s First Annual Summer Reading List. (And I reserve the right for it to be the last.)
Inspiration comes from Andrew Ross Sorkin’s The Essential Wall St. Summer Reading List, published on DealBook this morning. I’m a long-time and enthusiastic admirer of Sorkin (where does he get his sources?!), and so I’ll start by presenting his list, but don’t worry, I’ll twist it into unrecognizable form customize it extensively to what I imagine the Adam Smith, Esq. audience’s interests to be—which will also be modified by the lens of my own interests.
To provide a bit of guidance to smart, thoughtful, attentive readers who aren’t necessarily steeped in the history and theory of economics or the culture of business—but who are curious.
So, to Sorkin’s list, where he begins with out and out entertaining reads:
- “If I could read only one book this summer, it would be “Den of Thieves” by James B. Stewart, which was published in 1992 but feels just as relevant today”
- Then two “obvious classics” (I agree), “Barbarians at the Gate: The Fall of RJR Nabisco” by Bryan Burrough and John Helyar, who chronicled what was at the time the largest takeover in history, the leveraged buyout of RJR Nabisco by Kohlberg Kravis Roberts; and “Liar’s Poker” by Michael Lewis, a romp through his time as a young trader at Salomon Brothers.”
- “I’d add one more to that classics list that has largely gone underappreciated and is often privately lauded among some of the best business writers in the country, “The Informant” by Kurt Eichenwald. The book is about the Archer Daniels Midland price-fixing scandal”
- “The genre of narrative business books that I love so much — the ones that have a you-are-there quality — was invented, or so it is said, in 1982 by David McClintick, who wrote “Indecent Exposure,” a rollicking good read about a Hollywood scandal and the ultimate boardroom power struggle at Columbia Pictures.”
Sorkin next proceeds to somewhat more edifying reads:
- “Lords of Finance: The Bankers Who Broke the World” by Liaquat Ahamed, who won the Pulitzer Prize for his historical look at the many crises — and central bankers — that led up to the Great Depression.”
- “‘Capitalism and Freedom’ by Milton Friedman, a seminal work that helped frame a long and heated debate about capitalism versus socialism that is still at the heart of the American discussion of the economy and politics.”
- “By now, it seems as if everyone has already read Thomas L. Friedman’s “The World Is Flat: A Brief History of the Twenty-First Century.” It changed the way we think about global business, competitiveness and the implication for far-flung economies, governments, education and more. Mr. Friedman, a longtime columnist for The Times, last revised the book in 2007, but it’s as relevant as ever to thinking about the current challenges. If you haven’t read it, do so.
- For readers looking for a great biography, start with “Steve Jobs” by Walter Isaacson. It provides remarkable insight into the eccentricities and drive of Mr. Jobs. It also raises some profound questions about what it takes to lead a successful company. Then grab Ron Chernow’s “Titan: The Life of John D. Rockefeller Sr.”
Sorkin ends with two marvelous books which I fear have become trite and exhausted through relentless overexposure, and a third not really, to my thinking, about business or economics at all. The trite pair are Sun Tzu’s “Art of War” and Machiavelli’s “The Prince.” The final one, and the correct answer to the SAT question, “which item does not belong here?” is Benjamin Graham’s “The Intelligent Investor: The Definitive Book on Value Investing.”
Now, let us as they say amend and extend Sorkin’s remarks in the mold of Adam Smith, Esq.
For the record, I have read every title on Sorkin’s list with the exception of Eichenwald’s “Informant” and McClintick’s “Indecent Exposure,” on which I shall accordingly withhold judgment.
I’m also going to omit any and all books about the 2008 Great Reset and everything associated with it, since it’s far too soon to gain any perspective on those events; we’re still living them.
Now, books that make the Adam Smith, Esq. First Annual Summer Reading list without reservation:
- “Den of Thieves”
- “Barbarians at the Gate”
- “Liar’s Poker”
- “Lords of Finance”
Books that make my list with reservations:
- “Capitalism and Freedom”—but only if you’re also prepared to read, or at least deeply sample, Joseph Schumpeter’s “Capitalism, Socialism, and Democracy” (whence we get the term, and invaluable concept, of “creative destruction”).
- “Steve Jobs” and “Titan”—with the surpassing caveat that lives of individuals, even legendary and vastly influential ones, are just that—lives of individuals, with all the irreproducible weirdness they bring to the table. Entertaining in spades, but fonts of enduring guidance? Not so much. (Indeed, the vast literature to the effect that genius shares a very long and undefended border with madness is only growing. “Titans” such people may indeed be, but exemplars of how to live as full human beings? More to the point, are we even capable of emulating them if not so endowed at birth?)
Books that do not make the cut:
- “The World Is Flat” (thanks, Mr. Friedman, but we’ve heard all about that);
- The final triplet—”Art of War,” “The Prince,” and “Intelligent Investor;” and
- Anything whatsoever by John Kenneth Galbraith or Paul Krugman (yes, that one’s for extra credit, folks).
What else do I recommend?
- My “desert island” business book—the book I’d recommend if you could only read one—would without doubt be Clayton Christensen’s “Innovator’s Dilemma,” which will cure you of any sense of complacency you may have ever felt or will ever feel. (William F. Buckley, Jr., having a pragmatist’s turn of mind, said his desert island book would be one on boat-building.) You’ll see in a moment that I cheat on the “desert island” category, since I have “Innovator’s Dilemma” in the business desert island category, and “Knowledge and the Wealth of Nations: A Story of Economic Discovery” in the economic-history-and-theory desert island category.
- “Built to Last,” Jim Collins’ 1994 study of 18 companies that outperformed their competitive set in an attempt to answer the question “what makes for an exceptional company?” Not all of his examples have stood the test of time, but concepts such as “having the right people on the bus” are timeless.
- And finally, a bit of an outlier, but the single most informative work of economic history and theory that I’ve read: David Warsh’s 2006 “Knowledge and the Wealth of Nations: A Story of Economic Discovery.”
Assuming few of you are familiar with Warsh’s book, a bit more about why it’s nip and tuck with “Innovator’s Dilemma” to finish as my top recommendation out of all of the above.
The two most famous intellectual memes to come out of The Wealth of Nations are those of the pin factory (division of labor) and the invisible hand (marketplace competition enables the best products and services at the lowest prices). Now, if you think about it, these are actually contradictory in a fundamental way, or at least incompatible views of how markets evolve. The pin factory parable is a story of constantly increasing returns to scale, which lead to one, or at most few, dominant players in a market, which immediately leads to monopoly or oligopoly distortions and suboptimal production levels and prices.
But the invisible hand presupposes a multitude of suppliers in a market, in order to enforce rigorous price and quality competition and to extract the highest feasible performance from every firm at risk of losing market share.
Historically, since Adam Smith’s time and up until the 1980’s or thereabouts, economists pretty much without comment or notice chose the parable of the invisible hand over the pin factory, partly for reasons of ideological correctness I suppose but also (and equally indefensibly) because it lent itself more readily to mathematical modeling. Warsh’s book does nothing less than square this circle, in theoretically solid but eminently approachable and entertaining fashion. Quite a coup.
The first half or so of the book is one of the most accessible and engaging treatments of the history of economic thought since Adam Smith–with equal weight given to the personalities, the institutions, and the broader sociopolitical forces at work. If the book ended with that, a Grand Tour of Smith, Ricardo, Keynes, Marshall, and Schumpeter, forward to Robert Solow and Kenneth Arrow, it would be a “short list” read for sure.
But it’s the second half where Warsh provides something I’ve not yet found anywhere else, at least not in as condensed and trenchant a fashion. Warsh takes off from the work of Paul Romer’s 1990 paper, “Endogenous Technological Change,” which is (fair warning) mathematically dense and imposing, but which at its core had the profound insight of substituting for the (neo)classical triumvirate of labor, capital, and land, the more powerful triad of people, ideas, and things. In other words, Romer spoke the the language of how ideas are generated and spread, how papers are dreamed up, curated, and published, and how individual careers and the advancement of society as a whole intersect.
Understand Romer’s insight: He tackles head-on, and explains, the reality we all know that economic growth and the standard of living has been accelerating in wealthier countries at the same time it’s been stagnant or worse in poor countries. For the first time, he explicitly recognized knowledge (hence the first word of Warsh’s title) as an “endogenous” factor of production rather than, as in classical economics, an exogenous factor that struck (or didn’t) like random lightning strikes. To Romer, and to Warsh, the creation, refinement, and dispersion, or knowledge are critical to the modern economy, and largely explain “creative destruction”–which, for all Schumpeter’s brilliance, he left as a descriptive name (you know it when you see it) and didn’t develop into a theory of how to do creative destruction.
Need I point out that lawyers have a bit of a role to play in the organized, efficient, economically optimal, spread of knowledge?
So, to recap, organize, and condense my list into a Greatest Hits:
The fun stuff:
- Den of Thieves
- Liar’s Poker
The edifying stuff:
- Lords of Finance
- Innovator’s Dilemma
- Knowledge and the Wealth of Nations (the “desert island” choice)
For tremendous extra credit:
- But yes, it reads to this day with shocking freshness: Adam Smith’s 1776 Wealth of Nations
And finally, of course, the obligatory volume:
- Yours truly’s 2013 Growth Is Dead: Now What?