Books like Chances Are . . . — picked by fans

This book makes the novel and, to me, fascinating case that the economy is an evolutionary system that is constantly changing, implying that the static equilibria of conventional trade models are not usefully predictive. It also made it clear to me, from a different perspective, that the industries in which a country succeeds are path-dependent.

If you are a mosquito, the next evolutionary mutation will not produce an elephant. Likewise, it is much easier to design and manufacture 3 nanometer-scale chips if you have already designed and manufactured 5 nanometer-scale chips. This drove home to me how important retaining the key industries of today is for our long-term prosperity.

Personal financial planning has to include investing. With investing comes risk. There are many books on investing. There are few on how to approach investing. Although a short book, it succinctly covers how to think about stock returns, modern financial theory, building a portfolio with risk also in mind, and applying Monte Carlo.

This book combines risk with returns so that you can better target risk to your financial plans. Having a long term, which means the rest of your life, view helps you understand everything has cycles. Using cycles of different investments in a portfolio construct, rather than viewing each investment separately, helps mute cyclical effects on your plans.

I always refer to the fundamentals discussed in this book when I begin to second guess my own plans when markets “misbehave” as they always do. It reaffirms how the application of modern financial theory has worked in the past… show more.

Everyone makes mental shortcuts and also have biases. How can we learn to recognize errors in thinking when it comes to our money? How can we make better choices when it comes to saving or spending? Are we normal or irrational?

Behavioral finance began in the 1970s and I found Statman’s discussion fascinating on almost every page. He sums up these biases when applied to our financial choices as well as to the markets.

Normal people have wants and emotions. This contrasts with many books about how people are irrational. Indeed, we are more normal than irrational once we understand that poor choices are actually normal. Statman describes how to make better choices by recognizing choice and biases we have.

These concepts are important if you want to grow your wealth without making someone else wealthy through your spending habits.

This is a wonderful book organized around four main concepts, each valuable in their own right: 1) The Theory of Investing; 2) The History of Investing; 3) The Psychology of Investing; and 3) The Business of Investing. 

The latter, the business section makes it clear the stockbroker is not your friend, even though they’re friendly (by design). Having started my career on the sales side of the business, I quickly learned the agenda is less about the customer and more about product sales, even though I was also a Certified Financial Planner ProfessionalTM. 

I dropped sales licenses and became a fee-only advisor and member of the National Association of Personal Financial Advisors (NAPFA) where the focus is on planning and helping clients achieve their wants and goals.

The principles in Bernstein’s book marry well with those of both Swedroe’s and Statman’s books (above) in the application of growing… show more.

Everyone knows what probability is, and we all understand how a coin flip works, but not everyone can explain the optimal betting strategies for a roulette table. We don’t study probability to understand the likelihood of events. We study probability to understand the expected outcomes of business processes that depend on those events.

In other words, this book won’t just teach you about probabilities, it will teach you about business strategies associated with those probabilities. It will help you answer a question like: How do I maximize the profit on this life insurance policy, given this set of survival probabilities? It isn’t just a likelihood question, it is a business question. I highly recommend that anyone studying probability does so through an actuarial lens.

This is a more comprehensive and mathematically rigorous book than Pierce’s book. For the novice, it should be read-only after first reading Pierce’s more informal text. Due to its vintage, the layout is fairly cramped, but the content is impeccable. At almost 500 pages, it covers a huge amount of material. This was my main reference book on information theory for many years, but it now sits alongside more recent texts, like MacKay’s book (see below). It is also published by Dover, so it is reasonably priced.

Sadly, Games, Gods, and Gambling by FN David is out of print. This is the next best thing. Lorraine Daston has the supreme gift of making the complicated idea seem straightforward. This is an account of the frenzy for measuring that happened in the 18th century, and how it made the world we live in today, when the gambler’s eye for odds has become the algorithm of taming chance that guides all our decisions.

I found a copy of this book in the sixties. That copy, much loved, was lost in moves and mayhem. Now, I only have a Dover reprint (water-logged during yet another move), but I have never been without and would search high and low if I were.

This is also a history of probability but with a very different focus. Ms. David was a statistician able to explain the calculations intuitively (good to assign to my students). But she was also thoroughly interested in the personalities involved. What was Galileo like? What happened to Pascal at Port-Royal?

I felt personally drawn into the historical narrative that often reads like a novel. 

My knees tremble and my heart quakes when I think of how much work must have gone into these two companion volumes. Collectively, they are more than four times the length of my book, covering the whole of machine learning.

It is an essential encyclopedic resource that should be on the desk of anyone serious about machine learning.

Kaplan debunks everything you were taught about luck. If you’re like me, you were taught that some people were lucky and others weren’t. Have you ever heard someone say, “Well if I didn’t have bad luck, I wouldn’t have any luck at all!”? That’s a ridiculous thing to say because why would anyone associate luck with something bad? This is exactly what Kaplan brings an awareness to. 

Lucky people create their own luck; anyone can do it if they believe they are lucky. That’s it. Certain behaviors create luck, and those behaviors are fully outlined. For example, place affects luck. The book explains that “To get lucky, you have to be in a place where opportunities are going to be around you” (p. 53). Opportunities will elude you if you’re hanging out at the same bar with the same people for twenty years in a row. But opportunities will fall… show more.