Practical analysis for investment professionals
14 October 2016

Weekend Reads: The Favorite Books Edition

Posted In: Weekend Reads

Weekend Reads: The Favorite Books Edition

“Increasingly, we’re filling our heads with soundbites, the mental equivalent of junk. Over a day or even a week, the changes, like those to our belly, are barely noticeable. However, if we extend the timeline to months and years, we face a worrying reality and may find ourselves looking down at the pot-belly of ignorance.” — Shane Parrish, “The Pot-Belly of Ignorance,” Medium

What is it that we pour into our heads? What are we reading, where do we find it, and how thoroughly do we consume it? Shane Parrish’s provocative article caused me to stop and seriously consider what I mentally ingest.

“I am an avid reader,” I have proudly contended many times, with my head held high and my shoulders back. I point to the books I routinely carry around with me, in my car or in my bag, that I can easily wile away an hour or more in book stores and libraries. I also have a lengthy inventory of favorite websites that I peruse on a routine basis. I pride myself on knowing books, blogs, and authors — kind of an occupational hazard, but one I delightfully accept.

However, what exactly am I reading?

Now that my level of awareness has been raised, with my shoulders slumping I admit that I am easily enticed by the wild headlines and absurd promises found on the web — the dreaded clickbait Parrish refers to as junk.

More times than I can remember, I have clicked on a link, skimmed the article, and come away not having a clue as to what I just read. My brain being the wiser, “determined it was trash and subsequently got rid of it rather than storing it.”

No longer wanting to succumb to a brain full of garbage, I resolved to straighten up and follow Parrish’s advice “to learn from people with a deep, accurate fluency in their area of expertise.”

I decided to enlist the assistance of a few fellow Enterprising Investor authors and readers for their recommendations. And while these selections may not exactly make for a quick “weekend read,” so to speak, the variety is such that you and I will be able to fill many “palatable” weekends and nip any potential pot-bellies in the bud.

I asked for two recommendations: best business book and, because I am a nosy sort, favorite book of any genre. In no particular order, here are the selections, with any additional commentary provided:

Favorite Business Books

Favorite Books in Any Genre

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

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About the Author(s)
Susan Hoover, JD

Susan Hoover is the digital editor, Enterprising Investor blog, CFA Institute. Previously, she worked for McCallum & Kudravetz, PC, and the U.S. Department of the Navy in real estate and labor law. Hoover earned the CFA Institute Investment Foundations™ Certificate and holds a BA degree from Lehigh University and a JD degree from the Washington College of Law, American University.

5 thoughts on “Weekend Reads: The Favorite Books Edition”

  1. It astonishes me that ‘Good to Great’ [GTG] is on anyone’s reading list. I believe that the book’s research and inferences are the greatest hoax since “One Size Fits All.” As a world-class case study in how NOT to conduct business research, it’s terrific. But, as serious scholarship, it’s one of the all-time crocks.

    Before I get into why I say that, I want to mention the fact that Collins’s eleven “great companies” include these three: Circuit City (later liquidated through Chapter 7 bankruptcy), Wells Fargo (in the news these days for highly questionable business practices – its CEO for the last nine years resigned under fire this week and also gave back bonuses in excess of $41 million), and Walgreen’s (which made the mistake of affiliating itself with a Silicon Valley start-up, Theranos, which allegedly had created a proprietary blood-testing machine, but is now under fire for lying to its investors and for fabricating a lot of information, thanks to a series of articles that began a year ago in the Wall Street Journal).

    For starters, Collins’s method of choosing his eleven “great companies” is deeply flawed. In their paper, “From Good to Great to . . .”, which was published in the Academy of Management Perspectives, Resnick & Smunt (2008) find that Collins’s work “suffered from three major problems:

    “1) data mining with respect to the selection of the starting month of the company transformation period,

    “2) the failure to test for the sustainability of greatness over subsequent time periods, and

    “3) the failure to use modern portfolio theory that accounts for the costs of risk and then whether the performance differences are statistically significant.” [In other words, not using risk-adjusted returns – WDM]

    They close their paper with this:

    “Moreover, the fact that none of the 11 companies currently has a significantly positive alpha suggests that the market now appears to be fully aware of whatever the managerial abilities are at all of these corporations and has priced their stocks according to their market risk.”

    Another paper, “Good to Great, or Just Good?”, published in the same issue of the Academy of Management Perspectives (2008) by Niendorf & Beck says the following:

    “We contend that due to two fundamental research design errors, GTG does not show that the five GTG principles lead to ‘sustained great results,’ as Collins claims. Rather, it shows only that the 11 GTG firms had these principles in common during the specific time period studied by Collins. The different in these two conclusions is enormous, and the principal implication is this: GTG provides absolutely no evidence that applying the GTG principles to other firms during other time periods will lead to anything other than average business performance. Thus, Collins has not identified ‘timeless, universal answers that can be applied by any organization.’

    “The two fatal errors in GTG are data mining and mistaking association for causation. In this article, we discuss these two errors, and then test the performance of the 11 GTG companies after the time period used in the GTG study. By doing so, we find evidence that addresses the generalizability of the GTG principles. Our test results provide no empirical evidence for Collins’s claims that applying the GTG concepts leads to ‘sustained great results’.”

    Despite being written by academics, both of these papers are highly readable. For a PDF of either or both of them, please contact me directly: wmiller@beckmill.com.

  2. Ravindran venkatakrishnan says:

    Fantastic comment. I hated GTG, even though I did will myself to complete it. One of the companies highlighted was Fannie Mae right?

    1. Thank you, Ravindran. Yes, you are correct – Fannie Mae was one of the eleven. Here’s the full list:

      1. Abbott
      2. Altria (nee Philip Morris)
      3. Circuit City
      4. Federal National Mortgage Association (Fannie Mae)
      5. Gillette
      6. Kimberly-Clark
      7. Kroger
      8. Nucor
      9. Pitney Bowes
      10. Walgreens
      11. Wells Fargo

      Thanks again.

  3. Marcel Lana says:

    The Alchemist’s authors name is Paulo Coelho, not Paul Coelho.

    1. Paul McCaffrey says:

      Thanks for the spot, Marcel.

      It’s corrected.

      Thanks for reading.

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