Book Box: How to Avert a Financial Collapse
Explore solutions to a crisis by understanding financial systems with these 6 books. And meet Ashish Chauhan, CEO of the National Stock Exchange, for a bookish conversation
A few months ago, I attended a talk by Edward Chancellor.
You can’t really understand the world we are in, until you understand what interest does, the bestselling financial historian said, to a packed pavilion at the Jaipur Literary Festival.
His words came back to me this week, as Silicon Valley Bank Bank collapsed and Credit Suisse almost did. Across sectors, thousands of people lost more jobs in more layoffs. Browsing through the Waterstones Bookstore at Piccadilly on Sunday, everywhere I saw Its OK to be Angry About Capitalism by Bernie Sanders, as conversations around financial markets, capitalism and democracy rage on.
In this swirling storm of financial speak, as bondholders battle with shareholders, and jobholders try logging onto their official email ids to check if they have been laid off - how do we form opinions on what is happening? And figure out what can be done to help.
My go-to financial fix this week, is these six books.
Book 1 of 6:
This is where it all begins. With rates of interest. In Jaipur, Edward Chancellor warned his listeners against the seductive magic of low-interest rates. Don’t give me a low rate. Give me a true rate, and then I shall know how to keep my house in order, he quotes a German banker in 1927, saying. The Price of Time is a fascinating history of interest rates from Mesopotamia to the Mississippi to Manhattan. It bursts with vignettes of central bankers, moneylenders and merchants, economic theorists and even an anarchist. It’s slow, given its subject matter, but because it’s so well written, it keeps you absorbed. And since it’s a subject that continues to impact our lives so drastically — it’s definitely a must-read.
Book 2 of 6:
Lanchester explores everything from investment banking to the larger economy, in entertaining and easy-to-understand prose in Whoops: Why Everyone Owes Everyone and No one Can Pay. Read this for the story of everything that’s gone wrong, from derivatives to deficits. Here’s a flavour — Moneymen don’t see risk in the same way that civilians do. To most of us, risk is for the most part a bad thing; at best, it’s something we seek out under specific circumstances, to generate a feeling that things are just-dangerous-enough-to-be-exciting. In the world of money, risk is different: it’s desirable. That’s because, in investments, risks are correlated with rewards.
Book 3 of 6:
The authors of this incisive analysis ask themselves two questions - How did finance cause this crisis? And why is it so difficult now to manage the consequences and reform finance? The answers are 296 pages long and worth every page. If nothing else, read the introduction for the brilliant way the authors frame the financial problem - bringing in metaphors and world views used by others writers like Gillian Tett and Martin Wolf.
The authors, all academics, don’t mince their own metaphors, as they compare designing fragile financial systems with imperialist incursions like Vietnam, Afghanistan, and Iraq, which start from hubris and not surprisingly, end in disaster. Here’s an example: The crash took out Lehman, Bear Stearns, and Merrill Lynch from US investment banking but the surviving investment banks and conglomerates now represent themselves as the survivors who can handle derivatives, as if they were recreational drugs that are safe enough for sensible users.
Books 4 to 6:
And finally, three evergreen favourites — my fourth book is When Genius Failed the racy pacy book about the 1998 failure of two Nobel prize winners and their hedge fund.
The fifth is Too Big to Fail, an incredibly vivid and gritty story of the 2008 financial crash, by journalist Andrew Ross Sorkin.
And ending with The Bonfire of the Vanities, a novel by Tom Wolfe, set in 1980s New York, which brings alive the ambition, racism, social class and politics of a Wall Street world. All three have movie versions, but going back to the books gives me the nuances and helps me relate those worlds to ours.
On now, to another bookish conversation — with Ashish Chauhan, CEO of the National Stock Exchange. This IIT IIM alumnus takes us through his journey of reading — from Russian literature translated into Gujarati, in the libraries of Ahmedabad, to books on capital and risk, amidst the bourses of Bombay.
Here are edited excerpts of our conversation:
Tell us about your childhood reading.
I grew up in Ahmedabad and studied in a Gujarati medium school till Class 12. It meant (in retrospect) that I couldn’t read any literature in any other language other than Gujarati till age 17. Both my parents were highly educated and my mother was a gold medalist in economics. They inculcated in me the habit of reading.
I was an avid reader of Gujarati fiction and Gujarati magazines which also used to run long-running fiction novel series which used to be published over several months or years.
Kanhaiyalal Munshi, Joseph Macwan, Shayada, Umashankar Joshi and several Gujarati authors come to mind who I recall reading. Gujaratno Naath, a series of novels by Kanaiyalal Munshi on Siddharth Jaysinh, an old Gujarati king was quite impressive. Amir Ali Thag Na Pila Rumal Ni Ganth was another memorable novel from my childhood. I was able to read very fast and read many books simultaneously since childhood. This habit has remained with me since then. In non-fiction, Mahatma Gandhi's autobiography — Satya Na Prayogo is my companion to date.
USSR and India were on good terms. USSR also used to convert many Russian language books into Indian languages and made these available at extremely low cost to people. I was one of the avid readers of Russian books translated during my childhood. In those days, I read Chekhov, Lenin, Pushkin, Marx, Leo Tolstoy and many others. I recall reading War and Peace by Leo Tolstoy.
During my vacations, when I was not playing cricket with my friends, I would cycle to Ahmedabad's largest municipal public library and read books. They had developed a children's corner too. The library next to Ahmedabad's Maneklal Jethabhai Library next to the municipal town hall, was my constant companion during vacations.
Later on, when I joined BSE, one of the members told me that his grandfather had donated the funds for the library.
When you look back on your reading, have there been phases?
I think there have been three distinct phases as far as my reading goes. Before age 17, it was broadly only fiction in Gujarati and some essays. A lot of religious books, magazines and booklets.
After age 17, I started learning English at IIT Bombay while studying engineering. At that time, to learn English, I started reading PG Wodehouse books in English and also started reading a few other authors. Later, I graduated to Kafka, Frederick Forsyth, John le Care, Sydney Sheldon, Agatha Christie and others. That phase lasted till the year 2000 or age 32. I also used to read a lot of non-fiction, motivational books, philosophy, religious books, history books, science/maths books, self-help books, finance-related books and literally every thing that came my way. Most of my salary used to go into buying books those days.
After 2000, I started focusing more on non-fiction due to work pressure and spending more time with family as I got married and had a child by then. Since then, broadly I have been reading perhaps 10 non-fiction books for each fiction I read. Besides finance, I enjoy reading science by authors such as Stephen Hawking, Richard Feynman, Carlo Rovelli, Richard Dawkins, and Michio Kaku.
What are some books that have helped you professionally?
Ram Charan and Peter Bernstein's books have been impressive in their clarity in respective areas of management/leadership and the history of finance. Mahatma Gandhi has been useful in helping live a life of satisfaction and morality. Writings of political greats like Nehru, Ambedkar and others have also been useful in understanding India. Sunil Khilnani's The Idea of India was a breath of fresh air, when it was published.
What does reading mean to you?
Reading is something I take as essential for me to have a meaningful life and add value to myself every day. I am a compulsive and indiscriminate reader since childhood. I can read books on most topics under the sun and get reasonably interested in most facets of life. Reading complements my work and also helps me excited. It is also a relief from the day-to-day pressure of work life.
Recommend some of your favourite books on finance for our readers.
Each of these amazing and easy-to-read books is a seminal book in its own area. Even an uninitiated person in finance would find them enjoyable.
Manias, Panics and Crashes by Charles P Kindlberger
A Random Walk down Wall Street by Burton Mulkiel
The Prize - the epic quest for oil, money and power by Daniel Yergin
Lords of Finance by Liaquat Ahamad
Antifragile, The Black Swan and Skin in the Game by Nassim Nicholas Taleb
Capital Ideas and Against the Gods by Peter Bernstein
I feel elated and enriched and continue to do so each time I re-read these books.
Recently there have been many books about finance scams/meltdowns. Any recommendations from this genre?
Nowadays, we are spoiled for choices when there is a scandal. A lot of books on the same issue with different perspectives and sometimes very different basic material come up.
In India, given my work for the last 3 decades and even my current work, I would stay away from giving recommendations on any specific book. Usually, Michael Lewis is a very interesting author when he writes about specific financial scandals. Like Liar's Poker on Salomon brothers collapse and Flash Boys on high-frequency trading in US stock markets.
The Billionaire's Apprentice by Anita Raghavan is an interesting book on the Rajaratnam insider trading scandal that rocked Wall Street a decade ago.
Which books do you gift the most?
I used to gift Ram Charan and Execution by Lawrence Bossidy. Later on, I started gifting “BSE, the Temple of Wealth Creation”, a book I co-wrote. Nowadays, I gift “Sthitpragya” by Mayoor Shah, a book written about my life.
And lastly, what books are you currently reading?
Money and Empire: Charles P Kindleberger and the Dollar System, Yuganta by Iravati Karve, Lifespan by David Sinclair and Debt: the First 5000 Years by David Graeber.
Next week, as we move from March to April and a new financial year, I return to the subject of women, this time in the context of 5 must-reads on money.
Until then, Happy Reading.
Sonya Dutta Choudhury is a Mumbai-based journalist and the founder of Sonya’s Book Box, a bespoke book service. Each week, she brings you specially curated books to give you an immersive understanding of people and places. If you have any reading recommendations or suggestions, write to her at firstname.lastname@example.org
The views expressed are personal