10 Recommended Readings on Business and Policy

Piles of business and policy books are published every year. While almost any book has something worthwhile in it, only a small fraction are good. And for every profound idea there is a load of simplifications, unbiased assertions, after the fact reasoning and hype.

When considering what to read I know what to avoid. For starters, I’d avoid anything with a title similar to this blog title – anything with a number in it: “365 days of success”, “8 new roles of money” (from the Kiyosaki who brought us rich dad poor dad) or “101 ways to turn your business around”. I also avoid biographies and autobiographies. They tend to present a simplified view where the fortunes of companies and nations are over attributed to one person. This view is misleading and even dangerous when people start believing in saviors and messiahs. Autobiographies have all the flaws of biographies and they are also biased and are too often just pure narcissism. Finally, I won’t read a book about a company written from within like “the McKinsey way”. That’s just PR; Reading a book like that is as absurd as watching a TV channel in anticipation of a commercial brake.

Finding good stuff is much harder. Here are my suggestions:

1. Nudge

When faced with many choices people often don’t exercise free will to their advantage. People just don’t have the time (and often the skill) to think through all the options. Therefore policy makers (and business managers) should gently nudge people to a convenient default. Just think about how much you know about your pension fund investment policy. Didn’t convince you? Read the book, Thaler and Sunstein do a better job.

2. Caching the Rabbit

Spear, a MIT ESD professor, asserts that operations is more important than strategy. Few companies maintain a sustainable competitive advantage because of strategic decisions. And yet strategy is the talk of the day. Like many other management scholars in the 90s Spear studied Toyota. Spear tried to go beyond specific methods like lean, JIT and Kazan and looked at how Toyota created a culture of continuous process improvement.

3. The Upside of Irrationality

A former MIT professor, Ariely, doesn’t talk about big decisions, complex systems or strategy. As a behavioral economist, Ariely and his colleagues do small experiments to reveal human reasoning. However, these small experiments have important implications on big decisions like the effect of large bonuses (negative). There are probably more profound readings on this subject as Ariely and the whole discipline is based on Kahneman and Travesty’s work. But Ariely’s curiosity and humor make this book especially fun to read.

4. The Halo Effect

We are built to prefer neatly tied stories of cause and effect. Therefore we draw the wrong conclusions from success and failures or as Rosenzweig calls them delusions. Being aware of these pitfalls is the common thread to many of the writers in this list: Rosenzweig, Taleb, Ariely, Foley and Godwill. Rosenzweig does the best job at pinpointing the problem.

5. The Black Swan

At times, Taleb’s attempt to show his wit gets the best of him. But he has a profound idea on the effects of the rare event. This idea is beautifully symbolized by the black swan. If the black swan phenomenon and the effects of randomness become mainstream concepts of business management we will all benefit (all but traders and hedge fund managers).

6. Outliers

More than anything, Malcolm Gladwell, is a compelling story teller. Gladwell composes together fascinating academic research into a cohesive narrative. However, the plot is sometimes too nicely laid out for the sake of drama (happens much more in Blink).

Outliers examines the cases of Gates and the likes to show how a rare combination of circumstances of both luck and skills create extraordinarily successful people.

My take on it is that every industry titan owes his future to the roll of a dice. The only difference is that some like Gates, Brin or Jobs recognize the role luck played. Others like Trump and most Israeli tycoons think they were meant for greatness.

7. The March of Folly

Some decisions are proven wrong in retrospect. Follies are decisions that had “wrong” written all over them from the beginning. This classic book shows the impact of groupthink throughout history. Something to think about the next time you step into the corporate boardroom.

8. Freakonomics

This book is light, fun and full of interesting anecdotes. Years after reading it I still remember the examples of the economics of drug dealing, sumo fraud, children names and kindergarten incentive schemes.

9. Fool’s Gold

A 2010 list of business books isn’t complete without a book about the financial crisis. Tett, a Financial Times reporter, provides a good overview of the short history of derivatives.

10. The Tipping Point

Tipping points are part of game theory and system dynamics as well as chaos theory which studies infinitesimal changes in starting conditions that cause a great change in the finite state. In this book Gladwell shows real life examples of tipping points from crime in NY to epidemics in Baltimore.