Wednesday, October 31, 2012

The Hour Between Dog and Wolf by John Coates

What a fun book this is! The Hour Between Dog and Wolf by John Coates mixes pop finance with pop science, sketching some surprising links between them. I will trust Coates to get the science right (he provides citations). His investigation of financial markets is largely anecdotal and so speculative, but all the same it yields tantalizing suggestions.

Coates is a former derivatives trader -- which gives him authority to describe the subjective experiences of winning and losing at a trading desk. He (somehow) becomes hooked on neuroscience research; he describes himself sneaking away from his Wall Street desk to mix with scientists at Rockefeller University. The book seeks to bring these two worlds together. Coates immerses himself in the activation of hormones: testosterone, cortisol and the like. It is these chemical agents that produce the profound effects on the humors of financial traders, and hence overall market behavior.

Coates attacks the mind/body dichotomy: a financial market trader reacts more like an athlete than an analyst in responding to the stimula communication through his screen. Coates employs emerging understandings of mind/body feedbacks to track the play of traders. The traders can react before they 'see', rely on 'gut feelings' and engage in mano-a-mano combats from which they emerge winners or losers. These are quintessentially physical experiences. The markets themselves may then be understood as projections of this human biology.

Trading in financial markets, like war, is a young man's game. It draws on physical resources and reaction times, and a constitutional inability to fully appreciate surrounding dangers. But young soldiers require leaders with a different set of biological characteristics for larger scale success.
Coates develops a human biology account for market cycles. Biofeedback loops reinforce confidence in those traders experiencing winning streaks -- and most traders win in rising markets. The narcotic effect accompanying success then goads these traders to risk again and again, with ever greater stakes. The manic exuberance (a real physical effect produced by past successes) pushes speculators beyond 'rational' limits. Perspective is lost by nearly all at the top of a bubble.

Friday, October 12, 2012

Private Empire: Exxon-Mobil and American Power by Steve Coll

Steve Coll's Private Empire provides oil spill-to-oil spill coverage of the recent history of Exxon-Mobil, and in that course brings us Bush/Cheney adventures, climate change deniers, armed conflicts in lost and forgotten places, and the rise (and fall) of Russian oligarchs. In this complex work, Exxon-Mobil appears misunderstood and misunderstanding.

Coll begins his story with the 1989 crash of the Exxon Valdez, the moment that seared Exxon in the public consciousness as an environmentally reckless brute, pandering to America's oil addiction at the cost of America's soul. Exxon reacts from this crisis in both positive and negative ways. It becomes obsessed with safety -- though the company's pursuit of safety is not to assure accident avoidance as much as it is a premise for increasing demands for precision and attention from its workforce. The safety culture Exxon creates becomes, in a menacing way, grounds for enforcing discipline, regimentation and uniformity-of-voice throughout the enterprise.

The second formative moment Coll relates is the 1993 removal of Exxon's headquarters from New York City (Exxon was the former Standard Oil of New Jersey) to Irving, Texas. Neither bi-coastals nor Texans would be surprised by the resultant shift in company worldview.

Monday, October 8, 2012

Steve Jobs by Walter Isaacson

If only Lytton Strachey had written this biography of Steve Jobs. He would have punctured Jobs, ridiculed his dirty feet and preachiness, his unshattered conviction of his own primacy. Not that Jobs wasn't a great figure: he certainly was. But there is something off-putting when a biographer lets his subject declare (and so establish) his own importance. The temptation in reviewing this biography is to assess the subject and not the book. And the subject is certainly compelling. Jobs' accomplishments are familiar, his eccentricities less so. And so there is sordid attraction exercised by his abandonments, his eating disorders, his cruelty.

Isaacson relishes his access to Jobs and produces a work Larry King would envy. Certainly Jobs' foibles are presented -- but simply because a biographer has a license to report "warts and all" does not discharge his critical responsibility. Isaacson does not judge Jobs. At best, he reports -- in various fragments -- the partial judgments of Jobs' many friends, colleagues and acquaintances. Joan Baez is perhaps the most honest of all: she has little to say beyond a typifying story (Jobs is clueless) and leaves the impression that she meant more to Steve than Steve ever meant to her.

No doubt many readers of this book will search for easy recipes for replicating Jobs' phenomenal business achievements. Jobs seems to have had two running theories for Apple's success. The first account celebrates Apple's industrial design. The design story is complex -- and has deep psychological roots. Jobs learns from his father (a modest man he greatly admired) of the importance of finish, even for elements hidden from view. Design does not reflect the creator's integrity; it assures it. But design involves more than form following function -- the book is replete with stories of Jobs' rejecting engineers' design compromises that duly reflect functional concerns. The aesthetic trumps the functional in these stories (Isaacson gives no counterexamples), at times leading to stunning product, and at other times, to disappointment and delusion. In the affair known as "Antennagate," Jobs had insisted that a gorgeous steel rim surround the iPhone 4. Unfortunately, this compromised an essential function: the phone dropped calls at a higher rate. The technical solution adopted by many (and offered by Jobs) was an ugly case which, of course, masked the iPhone 4's design!

Jobs had a wonderful design sense, though he became increasingly closed off to new aesthetic experience. Dylan remained the center of his musical universe (his iTunes list is true to baby-boomer form). He perceives Bach's greatness -- but stops there (though Yo-Yo Ma is a "friend"). Had Jobs been more intrigued by music -- and willing to explore - he may have found artists who better reflected his simplicity instincts.

The second account of Apple's success draws on Jobs' insistence in controlling the user's entire experience. Isaacson describes the consistent Apple practice of developing both software and hardware. Microsoft's Bill Gates plays the role of advocate for the other stance: that software success is best achieved by maintaining an "open" philosophy, licensing to a wide variety of hardware manufacturers. Notwithstanding Apple's triumphs, Gates may have the better view.

The Jobs/Gates relationship fascinates Isaacson -- one is up when the other is down throughout their intertwining careers. Each is suspicious of the other, each hesitates to praise the other's strengths. Yet we're told of Gates' visit to Jobs' home soon before Jobs died: "Is Steve around?" Gates asks Jobs' daughter. In an enterprise version of the Great Man theory, Isaacson reduces the Microsoft/Apple rivalry to a personal contest between the firms' respective CEOs.

If there are prescriptions to be found here, they are the kind that cannot be followed. Make great products. Sure thing. In the end, Jobs is not a customer first guy. Nor is he, in his self-judgment, a product first guy. He is a company first guy, at least when that company is his. Jobs was, as Isaacson tells us, thrown out of Apple -- and when he returns, he works for a long stretch as an unpaid interim CEO because Apple remains throughout 'his'. Jobs' identification with Apple (and Pixar, the other major company he runs) is complete; it absorbs all his passion. No surprise that little part of Jobs was left for family. Steve Jobs declared that Apple would be his legacy -- he hoped to leave behind a great company that would persist in reflecting his values. Yet he was witness to the inevitable drift that befell two great companies -- Hewlett-Packard and Disney -- distancing them from the visions of their respective charismatic leaders.

A magical character dances through this story of Steve Jobs' life: his ever abused, frequently forgotten, yet always forgiving partner and Apple co-founder, Steve Wozniak. I like Woz.

Steve Jobs is shortlisted for the 2012 Financial Times and Goldman Sachs Business Book of the Year Award.