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Book reviews from 2019

19 December, 2019

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There is currently an exhibition in London called “Beautiful Books: Dickens and the Business of Christmas” which demonstrates the renowned author's significant influence on the commercialisation of the festive season.

In six short weeks before Christmas in 1843, Dickens wrote A Christmas Carol, purposefully keeping its length short, its binding and presentation eye-catching, and its price cheaper than contemporary novels. As a result its first run sold out by Christmas Eve as the increasingly wealthy middle classes rushed to purchase this curious stocking filler. Dickens would go on to write special festive stories for the next 20 years, becoming a major influence on our modern image of Christmas, and reintroduced the merry-making that had been pushed out during the rather sombre and puritanical preceding century. Sadly he himself eventually came to dislike the annual wave of books and gift giving, stating that he “was sick of the thing.”

In the spirit of his (former) views, below you will find some thoughts on a small but varied selection of books that we have read during the past year and that have, for various reasons, piqued our interest.

 

Prosperity by Colin Mayer

 

“Business! Mankind was my business … the deals of my trade were but a drop of water in the comprehensive ocean of my business.” A Christmas Carol


If we can be forgiven for remaining with Dickens for a moment, it can be overlooked that the character of Scrooge not only undergoes a conversion in his personal life, but also in his business. The firm of Scrooge and Marley has only one objective at the outset: profit. It exploits customers and staff alike and pays little heed to its position within society. There is even an interesting reading of the novel as a Malthusian vs Adam Smith debate (although nobody really wants that sort of conversation around Christmas.) But by the time of Scrooge's redemption at the end of the novel, the prevalent concern of the time, that business had lost touch with people, or that capital was created solely at the cost of labourers, is unravelled.

Fast forward 150 years and 2019 may be remembered within the business community as the year that the Friedman doctrine of profit maximisation was held to account. An announcement by a U.S. business Group — The Business Roundtable — upended decades of precedent by reissuing its statement of corporate purpose to focus on all stakeholders, the culmination of a number of years of increasing pressure on Friedman's theory.

In his book Prosperity, Professor Colin Mayer notes the pernicious collapse in trust in the corporation and offers a road map to the reform of the narrow focus that he believes corporations have adopted in the last thirty years. This revolves primarily around corporate purpose, through the enshrinement of purpose through legal and cultural avenues that forces companies to adhere to their promises and not merely extol the concept. That isn't to say that the corporation is in any way denigrated in the book. On the contrary, Mayer demonstrates how it has been a powerful instrument in progressing human well-being. However, the book astutely points out how the “rich mosaic of different purposes” has been eroded during the last half a century.

He offers pragmatic and wide-ranging ideas on how business may be made 'better' from the outside through legal frameworks, government policy, and taxation, as well as showing the benefits to the companies themselves as they invest more in human capital, while cognisant of the sustainability of their operations. Importantly for investors this does not mean sacrificing returns for, as Mayer notes, “enlightened capitalism will have to be profitable if it is to flourish. It will have to generate benefits for investors as well as society.”

 

100 Baggers by Christopher Mayer

 

We are slightly allergic to the title of this book because we position ourselves as an antidote to the 'gunslinger' self-image of the equity investors of the go-go era in the sixties and the generalized notion that equities are only worth investing in if they zoom up or down. Having said that, one should never judge a book by its cover title and the contents are compelling. Stocks that return $100 for every $1 invested might, like geniuses, seem likely to occur only once in every generation, but what Mayer makes clear is that they are numerous and also not restricted to eras that in general terms appear to be stock market friendly. Another elegantly-made point is that it takes time to make 100 times your initial investment; often 20-25 years. This is music to our ears because we are much more interested in the patient gain of compounded returns than the frantic in and out of capturing short-term valuation arbitrages that appear to be the target of most investors.

In Chapter 15 Mayer usefully distils the book to the many principles of investing in 100 Baggers. One is to find companies with high returns on capital. A company that consistently earns returns on its capital of 18% will create eight times the amount of shareholder equity after twenty years than one that consistently earns a return of 6%. Another is that economic moats are a necessity. A high return business must have a deep and wide moat to keep its return profile from deteriorating.  The final point he raises is that you need a really good filter. Markets are driven by the noise of geopolitics and also more specifically a substantial financial media that 'narrates every twist in the market.' Turn the screens off and go hunting for great businesses. Once you have found them, stick with them.

 

Frozen Desire. An Inquiry Into The Meaning of Money by James Buchan

 

Schopenhauer said that money is 'human happiness in the abstract,' which is as subtle and clever an insight into its meaning that you are likely to find. James Buchan has his own approach to this: money is 'frozen desire.' That want for a car or fridge or diamonds or new clothes, for a fancy meal or a new phone or television, for a holiday in the tropics or a house that has a garden that is just right or just for shelter; these are all available to us if we have the money to pay for them. That money therefore represents our desires, not so much in an abstract form but tangible and frozen until thawed by transaction. Separately, in his book Sapiens, Yuval Harari makes the point that money is a psychological construct; the 'most universal and efficient system of trust ever devised.' The value of money is not in its material but in the trust you have that its value can be redeemed. He gives the example of the US Dollar, used with confidence by people who do not believe that the US Government has legitimacy.

Frozen Desire is a wonderfully wide-ranging book that delves into art and culture as well as economics and notes how money freed us from the strictures of feudalism because the son and his son no longer had to follow the parent into their trade whether as wheelwright or armorer. The classical era was stable and everyone knew their place but money changed that.

It is full of arresting vignettes and colourful individuals. From the dark nightmare of Mount Petosi's silver mines, working twenty four hours a day to feed the Spanish need for currency, to remarkable people like Sir William Petty who went to sea at fifteen and later qualified as a doctor at Oxford and was perhaps the first to use mathematics to value land. Sir William was so short-sighted as to be almost blind and when challenged to a duel immediately accepted but asked for choice of weapons. He selected 'an hatchet or Axe in a darke cellar' thereby immediately making him one of our collective heroes. Money, far from existing for eternity, has a history and it has spread out, perhaps from many discrete points, to colonise the world and our thinking. Its remarkable power means it can be a great civiliser whilst also a force that atomises society and undermines human relations. In this fascinating book James Buchan does justice to money; perhaps our greatest practical imaginative creation.

 

The Human Stain by Philip Roth

 

Some books can appear to meld themselves into the epoch during which they are read, either through their style or their substance. Although written at the end of the last century, Roth's formidable novel remains painfully apposite for our times. Not because of its setting during the attempted impeachment of President Clinton, but because of its exploration of two human aspects. The first is the “ecstasy of sanctimony” as Roth so sublimely states, America's “oldest communal passion.” As the ageing University Dean Coleman Silk has his life picked apart after uttering what people misconstrue as a racial epithet, the resulting moral grandstanding and hysteria is eerily reminiscent of the twitter mob, 'cancel culture' and the viral nature of gossip and misinformation that technology has catalysed in the 21st century.

Perhaps more essential are the themes of identity and storytelling, both internal and external. Personal identity has always been one of Roth's crutches, but the extraordinary route by which he inverts expectations as he reveals the secret that Coleman Silk has lived with all his life, wrenches the subjects of race, discrimination and identity, kicking and screaming into the light. In an age of identity politics, this exposition of self-identification, and the delusions required, does much to expose the underlying causes of America's — and indeed many other nations' - current tribalism and political upheaval. In this searing novel, Roth has left something that will speak to our relationship with modernity for decades to come.

“Happy, happy Christmas, that can win us back to the delusions of our childish days; that can recall to the old man the pleasures of his youth; that can transport the sailor and the traveller, thousands of miles away, back to his own fireside and his quiet home!”
The Pickwick Papers

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