011-2019 Why Wall Street Matters

Book Title: Why Wall Street Matters

Author: William D. Cohan

At some point in everyone of our lives we would have heard the name ‘Wall Street’. If you only know it by name, but not what it is or what happens there, then let’s quickly fill you in. It’s a place in the United States of America where people buy stocks/shares in entity’s that have become public entities, or where people can put their money into a bank as savings, and the bank then loans those funds to others that wish to build a business, or expand its operations.

To give some interesting history about how the stock exchange arose, let’s go a little back in history.

Far back in our history, when kings ruled countries, kings (who in today’s equivalent served the same function as government) collected taxes to fund the basic services to keep the kingdom running effectively. Services included protection (soldiers), water from wells (water), infrastructure (streets in the kingdom, as well as walls) and food (from farmers that sometimes rented the lands around the kingdom), and many other activities. However, all funds collected from taxes didn’t solely fund those activities. They were also used to fund expeditions and wars.

The king was one source to collect funds in order to do something new. The other source was wealthy merchants who engaged in trade with other cities in order to trade goods between people in different cities. Because those goods were only obtainable from the merchant and not by a producer in the city, the merchant could charge high fees for his time and effort to bring them to the city via shipping and caravans.

Therefore, the main application of their funds was to keep the kingdom a good place to live in, and also to fund their businesses.

However, as you may have read, this was only accessible to the wealthy at the time. And they mostly only did business with those they trusted, or risked their funds with those they knew.

Then came a concept in the Netherlands around the early 17th Century (according to https://beursgeskidenis.nl ) where some of the middle class members could collect some of their funds, and then all those funds would be used collectively to fund an expedition or ship trade. When the expedition or ship returned, the goods they returned belonged solely to all those members who had contributed their funds to send the ship on its way. Thus, a new way of funding was born to let the middle class and poor to participate in a trade game that had previously been only open to the wealthy few individuals.

Different to the exchanges back then to the stock exchange today, they mainly got their returns when a ship returned, whereas today, we get our returns whenever we get some dividends, or when we sell our shares.

However, it is not just in a stock exchange that we give our funds to. We also give our funds to banks as savings, and then the bank loans those funds to other individuals/business to fund something else, in return for interest over the amount lent.

The stock exchange and banks fulfill the same purpose if you think about it carefully: accumulate funds from many individuals, and give those funds to another party. However, with a stock exchange you take the risk yourself to invest in the person, whereas through the bank, the bank performs analysis and risk assessment to determine whether it is feasible to loan the funds, and ensure that a return is highly likely to be generated from the business or not.

I think a got a little excited when I started writing about stock exchanges and the banks, that I lost the thread on what the book is about. Sorry for that.

Coming back to earth, and into the book, the book perfectly explains the function of the banks, as well as what disasters we have faced in the past (Mississippi bubble, Great Depression) that has brought about the establishment and function of the Central Bank in a country.

As exciting it is to earn money from an investment in a stock exchange, or interest on savings not actively utilized by many people, it does hold some risks, and events in our past have shown us the down side of these ventures. Thus, to try and ensure that something as drastic as The Great Depression doesn’t happen again, or that it won’t be as hard on the economy, the governments have put in stronger measures (Central Banks, and Stock Exchange regulators) to ensure that there is a little less risk involved.

The book brings this great into perspective to the reader.

Therefore, for anyone that has a few hours (or days, not judging) to read up on how the financial world works, or evolved, this is a good addition to your finance books.

Rating:

The book is a great teacher to everyone on what happens not just on Wall Street, but also in their own country’s financial system. It brings in history into the equation to fully understand how the financial system originated (specifically the stock exchange), and also its downfalls, and our regulatory measures to improve the stability of the financial system. My rating puts it at a strong 4.8/5

Enjoy it!!!!

010-2019 Leadership and self-deception

Book Title: Leadership and self-deception (getting out of the box)

Author: The Arbinger Institute

Another great addition to my book collection (yes, I’m building one, and suggest you should too 🙂 ) is this great book right here. One of the biggest trends we see in business these days is that we are moving away from closed-door offices, and more towards open office plans. If you don’t know what I’m talking about here, it basically refers to removing the walls between us in the offices.

I myself have worked in different business environments to see that the private sector businesses have already implemented this to a large extent, whereas in the public sector it remains relatively the same as the old way, ie. close-door policy. With this I’m in no way saying that it is a bad thing, I just think that in the private sector they tend to try and incorporate whatever they believe can improve the business and make the personnel more efficient,

Coming back to the book, you will have seen that the book’s author is the Arbinger Institute. If you don’t know who they are, or what they do, the quick solution to that question (which I read up on their website just now) is that want to provide training to shift the ‘self-focus of an inward mind-set to an outward mindset’. Basically, give training so that you work more effectively with other people and less by yourself. For more, you can read up on the following website: https://arbinger.com . Otherwise, you can just type in ‘Arbinger Institute’ into Google and you should find it there, for those that don’t like clicking links (guilty as well).

The book is relatively small, being about 170 pager. So it shouldn’t take you as long as some other 290 – 450 pagers that seem to take forever (especially if you lose interest in the topic somewhere in the beginning).

The writing style is one thing that is brilliant about the book, because it doesn’t try and give you the theory about the book only and some quick pieces of examples. Rather, it gives you the plot of an executive having a meeting/interview/discussion with one of its senior managers. Therefore, as you read every chapter of the book, it follows the progress of the meeting/interview/discussion of the parties.

Also, it teaches the methodology very slowly and clearly. Therefore, it makes sure that the reader properly follows the thread of the theory that they wish to convey to you.

To give a brief overview how I understood the theory, we encounter a scenario, we can act in one of two ways (act upon it, or not act upon it) and when we chose not to act upon it we have self-betrayed ourselves (because we feel that we rather should have acted upon it, so we start feeling guilty), but then, to escape this, we look for reasons that justify our in-action to be a valid choice (by seeing ourselves as being the victims and everyone else as the guilty party), and thus shifting our guilt away. At this point you have gone into the box.

Now, you may not completely understand the full message from my brief paragraph, but if it were simple to explain the book could have been much much shorter.

So, the book properly explains how we encounter these types of situations (in both the professional and personal aspects of our lives) and then shows us how we can get out of the box.

You don’t need to take my word for it, but, after reading the book, I started to think a minute longer for any situation I encounter, before I take action. I am now, more than ever, aware of when I get into the box, and how I can get out of it as well.

For anyone that is looking for a book that can assist with personal development, I would highly recommend this book to you.

Rating:

For the value that it gives to the reader, as well as the writing style the author uses to teach the theory to the reader, on my scale it definitely deserves a 6/5.

Happy reading !!!!!!