Parenting

Financial Economic Book Group (#2)

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A couple months ago I shared some of the books that I’ve read recently with my older children as part of a family book group. My focus has been on exposing them to a wide variety of ideas, in the hope that a small fraction of them stick. Usually we make a goal to read a couple chapters independently during the week, then regroup on Sunday to discuss what we’ve read. The last couple books, we’ve even included my wife in the mix, leaving the “smalls” (as we call them) to fend for themselves during the hour we discuss the book.

Here are a few more books that we’ve read recently.

Captured Economy

The economy is rigged.

That’s the message of The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality by Brink Lindsey (libertarian) and Steven M. Teles (liberal). The book outlines how entrenched interests use regulation to capture an outsized portion of the economy, creating “rents” that inhibit economic growth and sharpen the wealth divide. Some of the targets of the book include occupational licensing, the financial sector, intellectual property, and homeownership. Each of those areas benefit from regulation that creates barriers to competition and saps economic dynamism. I highly recommend this book.

The Post-American World

After reading Factfulness earlier in our book group, The Post-American World by Fareed Zakaria provided another perspective on what it means to be the only world superpower in the 21st century. The main argument Zakaria makes is US foreign policy behavior undermines its influence in world events, and that the rising influence of China and India is making US influence obsolete. Instead of going it alone, the US needs to incorporate broader coalitions. The book was written at the end of the George W. Bush presidency, making it slightly dated, but the ideas remain mostly relevant.

Blink

I first read Blink: The Power of Thinking Without Thinking by Malcom Gladwell over a decade ago, not long after it came out in 2005. Since then, I have become cynical about business psychology books and the oversimplification of complex topics and cherry-picked anecdotes. In my view, a business book gets a negative mark if it cites Tversky and Kahneman. Nothing against Tversky or Kahneman, but everything against hack journalists riding on the coattails of their research. Thanks, but I’ll just read Tversky and Kahneman myself.

So why am I reading it again? One of my children read it recently and wanted to discuss it in the book group. Reading it a second time didn’t kill me, but it still remains a quasi-business book filled with over simplistic anecdotes.

The Total Money Makeover

It wouldn’t be a complete survey of the financial ideascape without some exposure to Dave Ramsey. Love him or hate him, Ramsey has an outsized influence on personal finance. So I read The Total Money Makeover: A Proven Plan for Financial Fitness with the kids.

Ramsey provides a mix of both common sense and unsound advice, blended together with a dose of Christian-toned culture-of-responsibility. His rants can be entertaining, if hypocritical (e.g. “don’t file for bankruptcy like I did”) and mean spirited. His brand is big money and my inner cynic questions the altruism of his preaching. Could the fact that his program is used by bankruptcy courts influence the advice he gives about bankruptcy? 

I also found it annoying that in his over simplistic discussion of mutual funds (e.g. “buy growth funds; ignore everything else!”), he doesn’t mention index funds even once in the book. This seems strange given that index funds, which combine broad diversification and low fees, are arguably one of the simplest, financially prudent ways to invest. His advice on hiring experts to help isn’t terrible, but I’d steer clear of his network of financial planners and their exorbitant fees.

Phishing For Phools

Much of the economy is built around “what’s good for me is good for you as well”. Businesses are formed around bringing value to consumers and it’s generally a win-win situation. However, sometimes it’s a matter of selling the “what’s good for me, is bad for you”, and this is what is found in Phishing For Phools: The Economics of Manipulation and Deception by George Akerlof and Robert Shiller. Written by a couple of Nobel laureates, the book is pleasantly anything but dry and academic. From the tobacco lobby to the financial industry, we are shown how our psychology has been both used against us (mostly!) and also occasionally in our favor. Once example is how the tobacco lobby pushed smoking with the idea that “if you smoke, you look cool!”. Later, the anti-smoking campaign became centered on “if you smoke, you must be stupid!”.

Talking to My Daughter About the Economy

I first heard of Yanis Varoufakis when he became the Greek finance minister during the Grexit crisis a few years ago. When I saw his books Adults in the Room and Talking to My Daughter About the Economy: or, How Capitalism Works – and How It Fails, I thought they would make interesting reads for our book group. I decided to tackle first Talking to My Daughter, and while I enjoyed the simple narrative and anecdotes, my children weren’t too happy with it. I’m not 100% sure why. Varoufakis writes it as if he was speaking to his almost adult daughter who lived in Australia at the time, and I found the discussion of modern banking, corruption, and the history of inequality to be compelling. We have yet to pick up Adults in the Room, but I’ll likely tackle that one on my own.

A Random Walk Down Wall Street

Much of my investing philosophy can find its genesis from years ago when I picked up a copy of A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel, now the Chief Investment Officer at Wealthfront. Now in its twelfth edition, this book is a classic. This book is a heavy proponent of modern portfolio theory and that a broad portfolio of randomly chosen stocks will more often than not beat a carefully chosen portfolio by an “expert”. If you need convincing of the power of indexing and the myth of investing expertise, this book is for you.

Conclusion

Again, my goal of exposing my children to a wide swath of finance and economic ideas continues on. Just a couple weeks ago, my second oldest, on her own initiative, picked up A Fine Mess by T.R. Reid. She loved it and we may very well pick it up for our book group.

What’s on your financial education reading list? Any books you’d highly recommend that we tackle next? I’d love to hear about them in the comments.

2 thoughts on “Financial Economic Book Group (#2)

  1. Good list of books!

    Reading Dave Ramsey makes me want to vomit, though he has quite the cult following.

    A Random Down Wall Street was one of the most impactful books I’ve ever read.

    My oldest kids and wife are exclusive readers of teen romance novels (Twilight, etc). Not sure how your proposed book club idea would go over with them. Perhaps I ought to give it a try.

    1. Thanks for the comment! I too find myself having a visceral repulsion to Ramsey. I don’t want my kids to come back to me with “Dad! You gotta check out this guy!” Better to expose them now while they’re impressionable 🙂

      And yes, A Random Walk made a huge impact on me too.

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