Speech: Martin Wolf - Globalization

Why Globalization Works by Martin Wolf - 4/5

I read this book last year. It is an elightening overview of the issues that surround globalization and the consequences of liberal economies and democracies. The concepts are interesting with Wolf arguing that the world now is not as globalized as the late 19th century world. He gave a talk at Yale Unviversity on the issue. I have embedded the speech below which outlines some of the themes in the book. My review is @ Why Globalization Works - Wolf

The speech is pretty good and well worth the watch. At 84 minutes though it is long so its good to listen to at work. Unless you really want to see his slides. It is interesting to note that the Professor who introduces Wolf says that Wolf's book on the topic is the best book that has been written on the topic to date and has even made it required reading for one of his courses. I viewed it more as a laymans introduction to the topic. I know students will be able to benefit greatly from it, especially those who wish to move into a career in macro-economics.

Would love to know your thoughts. Comment is free.

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Rogue Trader - Leeson

Rogue Trader by Nick Leeson - 4 out of 5

Rogue Trader is a well written, fast paced, intimate first hand apologetic of Nicky Leeson's dealings on the Simex trading floor in Singapore and how he managed to run up huge losses to the tune of £600 million without anyone noticing and breaking one of England's oldest merchant banks. In a world where Jerome Kerviel loses EUR4.9 billion on unauthorized trades of EUR49 billion for Société Générale , Bernie Madoff runs a US$50 billion Ponzi scheme, where Lehman Brothers no longer exists and AIG is bailed out by the US government for US$180 billion, the "small" affair of losing £600 million in unapproved futures trades and options gambling doesn't seem so terrible, but it was enough to break one of the oldest merchant banks in the UK and create one of the hugest scandals in banking history at the time. Since Leeson broke Barings, many other financial catastrophes and corporate scandals (Long Term Capital Management, Enron, the dot com bubble and sub-prime mortgages to name a few) have come and gone and some remain with us today. Perhaps these events make Rogue Trader even more relevant today than ever.

It seems ironic that in this account of his misdeeds Mr. Leeson comes across as being incredibly honest about his fraud and his crimes. He doesn't shy away from the things he did and admits that he, and he alone is to blame for the catastrophe that befell Barings. He offers excuses (loyalty to the team, covering up their mistakes etc.) but ultimately the book is clear: once the initial deficit in the famed 88888 error account was cleared, greed to generate large profits on a risky futures spread led to the spiraling effect that eventually accrued severe losses for Barings and finally led to their downfall.

Mr. Leeson's account is also clear about the failings in the system and clear on what could have been done to prevent the losses he had accrued over the time he was doing it. I suppose it is easy in retrospect to question why someone would so easily transfer the tens of millions of pounds on a daily basis to cover margin calls, when the capital base of the bank was only a couple of hundred million. It is also hard to believe how it was possible for him to cover his tracks with lies about unauthorized over the counter deals without those deals being properly audited and investigated. Certainly the blame for the high-risk trading falls squarely on Mr. Leeson's shoulders. He doesn't shy away from it and doesn't hide from it, but there were clearly severe structural faults within the bank and no effective risk-management methodologies employed to ensure honesty in the traders and especially to grant oversight to Mr. Leeson. The greatest weakness in the system was Mr. Leeson being granted the right to manage the trading floor and the back office where trades where reconciled. He even admitted this was open to being corrupted and auditors even noted this was a structural weakness, but they never did close the hole. These structural flaws were noted in the book and as per Mr. Leeson, when reports were released by the Singaporean government, many of these flaws were exposed and blame spread across the board for failure to take note of what was going on.

Rogue Trader also has its tender moments. There is no doubt that Mr. Leeson was deeply in love with his wife at the time and there is no doubt that when they were on the run in Malaysia and Brunei there seemed to be genuine affection and love. Mr. Leeson speaks very highly of Lisa and even though they have since divorced, Rogue Trader shows the affection and passion he had for her and she had for him. Some of the moments they shared were truly touching and should not be second guessed. His portrayal of their relationship was an honest one and never, throughout the book is there a bad word said about Lisa (not that I can remember anyway). He truly loved her and she was in my mind amazing to stand by him through the initial troubles and trials he had to endure.

Rogue Trader is therefore a very personal, very real and very honest account of what happened and what caused the bank to crash. Some parts are amusing, others tragic. It is still a fantastic read 15 years after the fact. Since this book was published, Mr. Leeson has served his time in a Singaporean prison, survived colon cancer, remarried, has written a second book and is now the CEO of a football club. In Rogue Trader Mr. Leeson portrays himself as someone who was haunted by his shadows and who was relieved when they were exposed so he could once again walk in the light. Others who failed to provide proper oversight, could not. Some of those protagonists have reignited their careers (e.g. Peter Norris who was the head of Barings Investment Division is now chairman of the Virgin Group) but many did not. Mr. Leeson, as he says in public talks, will always be remembered as the man who broke Barings Bank, but he has moved on with his life and I for one am glad for him.

Stalingrad - Beevor

Stalingrad: The Fateful Siege: 1942-1943 by Anthony Beevor - 4/5

Beevor's Stalingrad is a powerful history of one of the biggest battles in history. He writes in a clear and logical way that reveals the full horror and tragedy of Stalingrad. His work strives to understand the human element and suffering on both sides of the battle and simultaneously effectively lays out the strategic and tactical elements of the commanders and the sheer insanity of Stalin and Hitler. His empathetic look at the conditions of the German soldiers and POWs in the final chapters of the book is a powerful reminder that war is not about valour and bravery but about death and suffering. And death and suffering is not only reserved for the losers, but also the victors as Beevor also explores the suffering of the Russians and their tremendous sacrifice.

Beevor begins his narrative at the beginning of Operation Barbarossa and the German progress to the gates of Moscow in the winter of 1941. He then follows the German retreat from Moscow and explores the rationale and the initial strategic goals of Operation Blue, the German plan to take over the oil fields in the Caucasus. He is quick to point out that the initial strategic goal of Operation Blue was not to hold Stalingrad but to destroy the manufacturing in the city and then aim for the oil fields. Beevor follows the rapid progression of the German Sixth Army across the Russian Steppe, over the River Don, to the gates of Stalingrad. He then documents in detail the defence of the city and the Russian struggle to prevent the Germans from crossing the Volga. Beevor then follows the Russian plan to liberate the city with Operation Uranus and Operation Little Saturn.

The power of Beevor's history is not the tactical and strategic understanding of the Battle of Stalingrad, but rather the human element involved. Beevor does not spare us from the details of the suffering and bravery on either side of the conflict, and the sheer cruelty and recklessness of the officers and the leaders involved. One of the most poignant anecdotes is the story of how a group of young Russian soldiers were sent out against a Panzer division without a single weapon between them. Of course their officer was drunk. The sheer reckless waste of life on the part of the Russians is shocking. And the willingness of Hitler and Stalin is a strong reminder of the folly of dictatorships and the abuse of power. Beevor is right to blame a lot of the wasted life on the shoulders of the leaders.

Beevor does try to help the reader understand the perspective of the soldiers on the ground and their undying faith in their leaders (although not all of them had the same belief as many betrayed their country and were executed). Even when all hope was lost, the German soldiers still believed in Hitler's promise that they would be saved and that a rescue was imminent. Even when Hitler was planning to sacrifice them as their was no realistic hope of victory.

Beevor also has strong opinions about the unimaginative and non-proactive approach the German Commander Paulus. He argues powerfully that Paulus was a good staff officer but not a battle group commander and squarely lays the blame on his shoulders for not preparing better when the Germans were being surrounded by the Russians. Beevor argues that Paulus should have prepared a Panzer division to enable them to breakout from the encirclement and should have been willing to disobey Hitler and breakout before it was too late. Beevor argues that Paulus would follow commands but never take the initiative to lead. It should be said however that Beevor redeems Paulus at the end when he argues that Paulus agreed to sign Soviet propaganda to encourage German soldiers to surrender so as to prevent the wasteful loss of life in a lost cause at the end of the War.

Still Beevor's most compelling writing is describing the hospital conditions and the suffering of the German's and Russians after the surrender of Stalingrad. His haunting descriptions of the hospitals, the hunger, the louse ridden bodies, the typhus, the dysentery and death by starvation among other things are powerful descriptions of what these men had to face. Of course the officers in the German command were given luxury quarters, but the grunts on the ground were sent off on cruel death marches into ill equipped, badly run prison camps. Yet Beevor does acknowledge that some Russians did help the Germans when they could.

Although Beevor looks at the long term implications of Stalingrad, I feel he rushed it at the end and that the far reaching implications of this battle could have been explored in greater depth, their effect on the German military, its implications for the fall of the Third Reich and the separation of Europe. I felt he kind of rushed the ending and that he could've added a little more. Despite this, it is a stunning book.

Stalingrad is a top-class laymen's history of an epic and important battle in World War 2. It turned the tide and the fortunes of the Allies and started the mighty push back of the Third Reich. It is worth the read, especially if you are interested in the Eastern Front and are looking for a beginner book on the topic. I do highly recommend Beevor's history and hope that no one ever has to go through such a horror ever again, but I do believe that is an idealistic and naïve hope.

Innovator's Dilemma - Christiansen

The Innovator's Dilemma: The Revolutionary Book that Will Change the Way You Do Business by Clayton M. Christensen - 4/5

The Innovator's Dilemma is a unique approach to understanding corporate failure. Christiansen's thesis is that well managed companies with all the best processes in place do fail. The failure is not due to inefficiency, bad management or bad processes but due to companies being responsible in terms of listening to their customers, investing in technologies that their customers' demand and rationally allocating resources to high-margin products. Christiansen argues that these investments are made on sustaining technologies as opposed to disruptive technologies. He reason's established sector leaders do this because the initial market for disruptive technologies is too small to justify the investment and sustain corporate growth. This provides new entrants with time and space to establish themselves in the emerging market and that when the performance of the disruptive technology intersects the needs placed on the traditional technologies in an industry, these disruptive technologies will start to take over from the traditional sector leaders.

Christiansen's thesis is that disruptive technologies exist in value networks with lower cost structures and lower margins than the value networks occupied by market leaders that focus on sustaining technologies and incremental technological developments. Christiansen argues that there are obviously more tangible benefits for competitors in value networks with lower costs structures (and margins) to attack value networks with higher margins. On the contrary, there is very little incentive for companies embedded in high-margin value networks to target sectors in the parallel network. And this then is the dilemma: how do current market leaders grow and develop substitute products that will make their current catalog redundant when the substitutes offer very little margin and won't contribute to the overall growth of the company.

Christiansen does suggest a few ways in which managers can facilitate the development of disruptive technologies. He first says managers should not grow disruptive technologies in established companies. Rather he argues they should create separate business units or companies with organizational sizes that match the market size. He also suggests that no one can really forecast the potential of market for disruptive technologies since the market doesn't exist. He suggests that instead of acting that forecasts are accurate, companies should learn and grow together about needed features and applications for their new products.

Even though the book was first published in 1997 the ideas are still valid. We have recently seen the rise of netbook computers and while Taiwanese companies are leading the way in the development and innovation of these products, traditional notebook and PC heavyweights like Dell are arguing against entering this market. Responding to Acer's recent rise to the second largest PC company by volume (Q3 09) in the world, Dell suggested they are more concerned with revenue and margin as opposed to volume. Another example closely aligned to the rise of netbooks are ARM processors. ARM processors are low cost processors licensed by a UK company. While they do not have the performance parameters of any of Intel's PC processors and chipsets, ARM processors (low performance, cost, power etc.) have been growing in the mobile phone space and are now entering the computer space through netbook computers on a different business model to Intel's or AMD. Of course Intel crushed AMD through a brutal price war since they both had similar business models. Even though I won't bet against Intel, it will be harder for them to disrupt ARMs growth.

Christiansen's book is well argued, clear and concise. His extensive use of case studies from a variety of industries including the hard disk sector, steel mills, discount retailing, and the excavator industries are enlightening and educational. He does reemphasize his points time and time again using different examples but he is merely honing in on his ideas and supporting them from a wide array of industries. It's a good read and essential for managers and executives who have the power to influence investment strategies for firms and resource allocation. However, for most of us who work in the trenches it is interesting and educational and I do recommend it to managers and other's that hope to develop new technologies and applications.

Why Globalization Works - Wolf

Why Globalization Works by Martin Wolf - 4/5

Why Globalization Works (WGW) presents clear and concise arguments as to the benefits of globalization and the need for a more integrated global economy. "Globalization," says Wolf "is no fanatical ideology, but a name for the process of integration, across frontiers, of liberalizing market economies at a time of rapidly falling costs of transport and communication." Wolf is clearly aware of the pros and cons of both sides of the argument and while he is not shy to agree with criticism of current globalization methodologies, he is also not afraid to reject anti-globalization claims on the negative impact of economic integration.

Wolf's main thesis is that liberalization of the global economy has lifted more people out of poverty in the past few decades than ever before in history. To support these views Wolf relies strongly on evidence from South and East Asia (China and India) to support his claims that globalization works. He also draws a lot on South American economies when explaining failures in different economies. It would have been interesting to see some deeper analysis of economies in Eastern Europe and specifically Russia that, layman such as myself, understand to have purportedly had a market economy for nearly two decades now.

The most powerful chapters in WGW are those where Wolf defends globalization against the criticism of the myriad of interest groups that are opposed to an integrated economy. Some of these criticisms include claims that globalization has a negative impact on the environment (at the local level he shows it actually improves the environment) and that localization is better (which Wolf argues is actually more dangerous than globalization since being able to purchase food anywhere in the world provides states with more security than if they were relying their own crops at home).

For me his most eye opening defense was against critics of child labor and the so called sweatshops that transnational companies use in the developing world. Wolf argues that to prevent child labour in these countries would border on the criminal and suggests critics in rich countries compare the plight of the poor to the alternatives they have in their own countries rather than the alternatives in the countries where victims suffer extreme poverty. Wolf suggests that child labour in multi-national companies enhances the livelihoods of these countries and suggests that if they were not employed in these companies with comparatively high working standards (when compared to local companies) these children would work find work in more dangerous, local factories, starve or become child prostitutes.

The same is said of the working conditions in labor intensive industries where companies have been accused of employing people in sweatshops. Wolf argues that many of those employed are women and this provides them with status and independence in patriarchal societies and provides them with freedoms they never previously had. He also argues these types of practices are pulling these people out of the grip of extreme poverty.

Although Wolf clearly advocates globalization, he is not averse to challenging some of the assumptions, pitfalls and difficulties in the way globalization has been implemented. For example, even though he argues that liberalization of capital accounts is probably a good thing, he acknowledges that done incorrectly and without proper consideration, the system can tank and lead to both economic and fiscal crisis. Wolf also finds it disgraceful that rich countries levy disproportionate costs on poor countries who wish to export goods and services into developed markets. He argues that rich countries do not impose such high costs on each other and argues these actions inhibit economic growth in the poorest nations on earth.

Why Globalization Works is a great introductory book on the topic. It is well structured, well argued, covers all the bases and answers many of the critics' questions. Wolf has compiled an impressive array of data to support his views and the critics would need to counter with equally compelling evidence. Added to this the book is well written and fairly accessible. WGW just may be, to quote the Economist, "the definitive treatment of the subject."

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Jesus and the Religions of Man - Marshall

Jesus and the Religions of Man by David Marshall - 4/5

Jesus and the Religions of Man (JATROM) is a wonderful apologetic that examines the core of our humanity in the context of our modern society. The major intellectual, political and social revolutions of the 20th century, that has formed the basis of our society in the 3rd millennium, are critically examined in the light of history. The author¡¦s reflective insights of the problems of Marxism, sexuality and eastern mysticism are drawn from a deep intellectual well that never runs dry. He is constantly comparing thought forms and ways of life to the life, thoughts and ways of Christ. He compellingly concludes that all (including the Church) fall short of the glory and the abundance of life that is offered in Christ. Anecdotal references to the authors own experiences travelling through Asia adds character and personality to a book that is filled with arguments that defends the Gospel of Christ in a new, appealing and refreshing way.

This is a great book. I especially enjoyed the chapter on how Jesus has changed the world. Marshall does not shy away from the crusades and the ¡§bad¡¨ things done in the ¡§name¡¨ of Christianity. Instead he shows that the world was not changed by the ¡§ecumenical authority of the Church¡¨ but rather the every day man and woman who accepted Christ into their lives. The people on the ground who allowed the transforming power of the Holy Spirit to work through them, conform them to Christ and allowed them to change the world. Marshall constantly appeals to the humanity of man and persuasively shows how man has tried to set himself up as a god. He calls us to a life of worship and submission to God for, as he shows by examining modern psychological evidence, the inward looking man will implode.

If you are an atheist, read this book and try to refute it¡¦s research and claims. If you are a seeker, JATROM will answer many of the questions that you are probably asking. If you are Christian, read this book and be inspired to continue to seeking the will of God, for as David Marshall repeats constantly, Jesus came to give us abundant life. If you are a Buddhist, Hindu or eastern Mystic, confront this apologetic on it¡¦s own terms. I am sure it will shed new light on your beliefs and who you are. Written with astounding clarity, occasional wit, amazing insight and compassionate persuasiveness, JATROM is certainly worthy enough to find a place next to Moreland, Schaeffer, and McDowell on any bookshelf.

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