The End of Wall Street

The End of Wall Street by Roger Lowenstein - former reporter of the Wall Street Journal, writer, financial journalist and director of the Sequoia Fund - is a masterpiece that traces the fall of the markets in 2008 to events that began several years earlier. From the first page until the very end, no one is spared. Alan Greenspan is criticized for his dogged insistence that 'markets are perfect and self-regulating'; financial institutions are shredded for greed, risk taking, and excessive bonuses; home lenders are blasted for lax lending practices; ratings agencies are thrashed for inherent conflicts of interest; Republicans are called out for their visceral dislike to regulation; Democrats are exposed for their insane support of home ownership even when people cannot afford one; and ordinary citizens take blame for financing daily lives on credit and home equity.The crisis therefore was no accident, but an event waiting to happen....

The book highlights the tendency of the past three decades to glorify the wizardry of 'quants' (mathematical geniuses in Wall Street who construct elaborate risk models) and diversification (securitization) of risk. Of the former, Lowenstein's complaint is that they assumed perfect markets where home prices only marginally go down. Of the latter, he adds that 'in the eyes of each individual firm, risk was reduced. But the danger that a failing firm could bring down a host of others was slowly and steadily accreted'. 

Books like these often offer lessons in humility (which may I add has been blatantly missing in Wall Street for a long time). Stan O Neal, the head of Merrill Lynch, comes across as increasingly aloof and playing golf - alone - for 100 days a year. His salary? $48M in 2006. Many of his fellow CEOs are no better, being highly disinterested in understanding the very complex instruments that they were peddling. Vikram Pandit of Citi orders a $350 bottle of wine in a fancy restaurant to savor just one glass (the rest is discarded). In Lowenstein's words, 'On Wall Street, the habit of extravagance is deeply ingrained'. Only Jamie Dimon of JP Morgan comes out looking clean. 

Mortgage securities, CDO, default swaps, and synthetic derivatives - every topic is well explained. So is the underlying message that the crisis - unlike the Great Depression - was one of capital and not liquidity. The biggest takeaway however is that there is no such thing called a self-regulating, safe and rational market.  In that sense, the book is not really a statement on the end of Wall Street as such, but a more measured viewpoint that the old ways of working at Wall Street are coming to an end. 

Roger Lowenstein deserves kudos for taking a complex topic and peeling it layer by layer for all of us to see - and comprehend. If a fast-paced account on the last few months of the crisis in 2008 is what you are after, you are better off with Too Big to Fail (reviewed here). But if you really want to understand how the house of cards was built, The End of Wall Street is the right choice.

I am rating it 5 stars!!!

Coordination - The Great Male Challenge

"Not too many people can carry themselves wearing purple bordered shoes; they look great" said someone to me the other day. Until then, I did not even realize that shoes normally do not come with purple borders. I was grinning that I got it right - but deep down - I knew that this is not how it was planned... 

Ask any guy to list the common theme across these 6 words - Almond, Buff, Camel, Daffodil, Eggplant and Flax. Buff will catch his eye right away. He will then attempt to somehow frame nakedness (search the term 'in the buff' on google) with the animal, flower and edible items on the list. Since this is a family-friendly blog, I will refrain from specifying the explicit thoughts that will eminently emanate from the hot-shot male. 

A lady on the other hand is not so complicated. One look at the list and the right answer comes out. "That is a list of colors dumbo". And she will rattle all the other exotic colors that go very well with this list (guys: for a sample of colors, please go here; ladies: don't even bother coz. you'll know much more).

Why is color coordination so unimportant for guys????? And why is it that when we do get it right, it is purely by accident?

Take my recent trip to Belgium. I went shopping for a pair of shoes at the Nike store. I am big-footed  (India Size 11 / US Size 12). The way I shop for shoes is simple and logical. I walked 4 aisles, picked all shoes that were size 11 (you normally don't get many), placed them next to each other, removed the most expensive ones, narrowed the count to two by trying all of them, and then chose the one that appealed to my eye. When I walked into a Nike Outlet Store in the US wearing those shoes, 3 store associates surrounded me to congratulate on my purchase and explain its benefits (it turns out that this model had been introduced only a month ago and that made me an 'early adopter'), and showed me a newer model that had come out only the week earlier. It was a heart-to-heart-pure-guy-talk focused on comfort and utility. It so happened that my shoes were colorful.

Even during the Stone Age when footwear was made only from animal skin, I am willing to bet that no woman would have chosen her shoes this way....

But there are also times when my color coordination brings me to earth. During the very same US trip, I wanted to disprove Priya's accusation that I choose 'sober colors'. I walked into the Wal-Mart store and bought a backpack for my laptop. Ignoring the greys, blacks and browns, I chose something 'bright'. The next day, I insisted that I be given a sub-compact at the rental car agency. "Mazda OK?" the sales guy asked. "Absolutely Fine" was my response. I was thrilled to be given a 'bright' sporty Mazda2. On Saturday, I selected the only neatly ironed 'bright' T-shirt that I had remaining. Oh Priya... you are so wrong.... your husband is brightness personified.... hmphhh......

Reality hit when I got to my car. My T-shirt.... was bright green. My laptop bag that was holding the camera and maps... was bright green. And my Mazda? Spirited Green Metallic like the one here. Aaargh !!!! Now I know why I outsourced my wardrobe and color coordination function to my wife several years ago....

There are times when lack of coordination can be brushed off. But there are moments - like traveling in India for instance - when coordination means everything. So the next time you plan a trip to India and you want to include some delightful sightseeing, I recommend that you consider custom tours. Savi & Madhu, friends of mine and former workmates, decided to celebrate their tenth anniversary in a way all of us only dream of - quit their jobs in the US, sell everything they possessed and undertake a multi-year trip through India. The result was this masterpiece of a travel blog aptly titled 10YearItch. Madhu loved the experience so much that he decided to start a Travel Company (10 Year Itch TOURS) to provide customized tours based on the knowledge gained by traveling around India for nearly two years. So go ahead, look them up, and read about their travel adventures here. And if you like what you see, talk to them and talk to others about them. I promise you that you'll love your interactions.

Please also note that I do not monetize my site or derive any profit. I write for the sheer pleasure of writing and for the joy/information that my readers get. I have placed a banner ad linking you to 10 Year Itch, but you can be assured that there is no monetary benefit here. I am always impressed with folks who spend time on the ground before embarking on anything. To me, that is a reflection of one's passion and that - I believe - will result in a superior product/experience for the consumer. Madhu, and the 10 Year Itch, belong right there.

The A-Z of Supply Chain Management

I recently completed reading Guide to Supply Chain Management: How Getting it Right Boosts Corporate Performance. This is published by The Economist and written by an eminent supply chain strategic consultant. If you are a novice to supply chain and often confused by conflicting definitions on what SCM is - and is not - read this book. If you are a supply chain practitioner and want some clear markers on designing a comprehensive supply chain strategy, read this book. David Jacoby's experience of over 20 years clearly comes through in this well-researched piece.

The book very quickly jumps into the 4 key supply chain strategies - cost rationalization, demand-supply synchronization, customization and innovation - that organizations can pursue. And highlights early on the often forgotten point that while we can classify any function within an organizational silo, activities within them cannot be similarly silo-ed if we want to derive value. For instance, we often lump DC-Network design and an initiative such as cross-docking under the warehousing function. But how many of us look at the former activity through the lens of cost rationalization, and the latter as an enabler of synchronization? Insights, such as this, abound.

The book frames the final few chapters with details on the organization structure, information systems framework and KPIs that must supplement each of these strategies. And that is when we truly comprehend the completeness of supply chain management.

My only grouse is that the book went into too much of theory and detail toward the end. Maybe it was intentional, given the wide range of audience it aims to cater to. But if you can stifle some of those yawns and plough on, you will be enriched with a wealth of knowledge on how you must design, strategize, implement, measure and enhance your supply chain.

I'll rate this 4 stars.