Friday, May 28, 2010

Book Review: The Big Short

I ripped through The Big Short: Inside the Doomsday Machine in a few days. I'd been told it was a easily digestible take on the recent financial crisis.

What I didn't expect was something that frightened me like a horror novel. For such a dry topic, he really turns it into a page-turner.

Some folk have critiqued the book for over-simplifying the topic. Little blame is placed on government, for example. The blame is mainly placed on improperly structured incentives and lack of risk prevention systems in Wall Street firms. These concerns are probably well founded. Nothing is so cut and dried, for sure.

That said, it's a good lesson in how companies - especially large complex ones - can get into real trouble when the left hand doesn't know what the right hand is doing, and in how leadership has a responsibility in both understanding their businesses and making sure the systems are in place to make sure those businesses don't run off the rails. Bottom line: If the buck stops with you, do you understand your balance sheet, and do you feel confident that the people and systems that report information into it are honest and correct?

I recommend the read, though be forewarned that you may find yourself pulling your money out of your mutual fund afterward and shoving it under your mattress.

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