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Archive for the 'Investing' Category

Monday, July 17th, 2017

Book Giveaway! Designed Leadership

Designed Leadership

“This book contributes a very thoughtful set of observations about the principles and practices of successful leaders who rely on a ‘strategic design’ approach. Moura Quayle draws on a diverse and impressive range of personal leadership experiences to illustrate and emphasize her points. Insightful, yet still accessible.” — Jeanne Liedtka, University of Virginia Darden School of Business

This week, our featured book is Designed Leadership, by Moura Quayle. Throughout the week, we will be featuring content about the book and its author on our blog as well as on our Twitter feed and our Facebook page.

Thursday, December 22nd, 2016

Why For-Profit Education Fails

Class Clowns

“Should anyone care that a bunch of very rich people have failed in these ventures? In fact, this should matter to anyone concerned about education. That failure, repeated so consistently, has given credible fodder to people who resist the active participation of for-profit enterprises in the educational sphere. But that sphere will always comprise public and private, nonprofit and for-profit institutions, and for-profit businesses play an essential role.” — Jonathan A. Knee

This week, our featured book is Class Clowns: How the Smartest Investors Lost Billions in Education, by Jonathan A. Knee. Today, we are happy to share an excerpt from “Why For-Profit Education Fails,” an article by Jonathan Knee that appeared in The Atlantic.

Don’t forget to enter our book giveaway for your chance to win a free copy of Class Clowns!

Why For-Profit Education Fails
By Jonathan A. Knee

[O]ver the past couple of decades, a veritable who’s who of investors and entrepreneurs has seen an opportunity to apply market discipline or new technology to a sector that often seems to shun both on principle. Yet as attractive and intuitive as these opportunities seemed, those who pursued them have, with surprising regularity, lost their shirts. JP Morgan backed Edison Schools’ ill-conceived effort to outsource public education in the late 1990s and saw the business lose 90 percent of its value during its four years as a public company; Goldman Sachs was one of many private-equity firms that came up empty after betting on the inevitable ascendance of for-profit universities; the billionaire Ronald Perelman shut down his futuristic K–12 educational-technology company, GlobalScholar, after spending $135 million and concluding that the software was faulty and a “mirage”; by the time the hedge-fund titan John Paulson was able to sell the last of his stake in Houghton Mifflin Harcourt, in 2015, he had likely lost hundreds of millions financing the company’s misguided mission to remake textbook publishing.

Not all financial investments in education end badly, but the number that have is notable, as are the magnitudes of the fiascos, in stark contrast to the successes of many of these same investors in other domains. The precise sources of failure in each instance are diverse, as are the educational subsectors targeted and the approaches pursued. But what many share is the sweeping nature of their ambition. (more…)

Wednesday, December 21st, 2016

The Road to Disastrous Educational Businesses Is Paved With Good Intentions

Class Clowns

“Scaling back ambitions and moving from high-minded rhetoric to the gritty operational challenges can have the feel of selling out. When the principles involved are viewed as fundamental, compromise—whether to a business model or to a policy platform—can be anathema. Yet the failure to do so in both instances not only makes the perfect the enemy of the good, but it also threatens to more permanently undermine the potential long-term benefits to both shareholders and the public.” — Jonathan A. Knee

This week, our featured book is Class Clowns: How the Smartest Investors Lost Billions in Education, by Jonathan A. Knee. Today, we are happy to share a piece of an excerpt posted in full by EdSurge.

Don’t forget to enter our book giveaway for your chance to win a free copy of Class Clowns!

Adherents of particular educational business models and advocates of particular educational public policy approaches have a tendency to use very similar language in promoting their views. Their favored instrumentality of change is typically described alternatively as “transformational” or “revolutionary.” In both cases, the evidence suggests that a narrowing of focus, a nuanced appreciation of the particular market structure and context, and an emphasis on the importance of effective execution would go a long way toward improving the probability of successful outcomes.

But this is easier said than done. In general, revolutionaries are not known for their humility. Scaling back ambitions and moving from high-minded rhetoric to the gritty operational challenges can have the feel of selling out. When the principles involved are viewed as fundamental, compromise—whether to a business model or to a policy platform—can be anathema. Yet the failure to do so in both instances not only makes the perfect the enemy of the good, but it also threatens to more permanently undermine the potential long-term benefits to both shareholders and the public.

In the public policy arena, there is no better example of this phenomenon than the failed efforts of well-meaning reform advocates to use Facebook CEO Mark Zuckerberg’s $100 million gift to Newark’s public schools to revolutionize urban public education more broadly. As documented by Dale Russakoff in her compelling 2015 book “The Prize,” the Newark initiative was disastrous, leaving little to show for the massive investment. In seeking transformational results that could be used as a template elsewhere, leaders misjudged the political environment, ignored the specific needs of the traumatized local population, and entrusted execution to true believers who did not have the required skills.

It would be hard to argue that the magnitude of this failure has not set back even better-conceived reform efforts. Those most responsible for the Newark debacle frequently invoked jargon plucked from business best sellers to justify their misguided efforts. Given the embarrassing results of many of the “transformative” educational business initiatives—including a number with which the same executives involved in Newark were associated—it is unclear how compelling these references were. More broadly, the failure of these business ventures has given credible fodder to those who resist the active participation of for-profit enterprises in the educational sphere.

Read the excerpt in its entirety at EdSurge.

Tuesday, December 20th, 2016

A Cautionary Tale on Education Investment Flops: Jonathan Knee on Squawk Box

Class Clowns

“When you try to mix your philanthropy with your investing, you tend to do both badly…. The important thing about good for-profit education is that it’s sustainable, it’s got a sustainable business model.” — Jonathan A. Knee

This week, our featured book is Class Clowns: How the Smartest Investors Lost Billions in Education, by Jonathan A. Knee. On Friday, December 16, Jonathan Knee appeared and discussed the dangers of investing in education on CNBC’s Squawk Box. To start the week’s feature, we are happy to share the video of his interview below.

Don’t forget to enter our book giveaway for your chance to win a free copy of Class Clowns!

Monday, December 19th, 2016

Book Giveaway! Class Clowns: How the Smartest Investors Lost Billions in Education

Class Clowns

Class Clowns is more than a business book, or a book on the education industry. Filled with colorful characters and gripping narratives, it poses deep questions that should engage a broad audience. By bringing the keen insights of a veteran investment banker, Knee demonstrates that no matter the goals, any business is subject to the basic laws of economies of scale, geographic advantage, and barriers to entry. This is an important lesson that many in the education sector seem to have ignored” — James B. Stewart, Pulitzer Prize–winning author of Den of Thieves

This week, our featured book is Class Clowns: How the Smartest Investors Lost Billions in Education, by Jonathan A. Knee. Throughout the week, we will be featuring content about the book and its author on our blog as well as on our Twitter feed and our Facebook page.

Friday, October 14th, 2016

Media Roundup: Capital and the Common Good

Capital and the Common Good

This week, our featured book is Capital and the Common Good: How Innovative Finance Is Tackling the World’s Most Urgent Problems, by Georgia Levenson Keohane. For the final post of the feature, we are happy to present a quick roundup of some of the great media attention Capital and the Common Good is getting.

Don’t forget to enter our book giveaway for a chance to win a free copy of Capital and the Common Good.

Georgia Levenson Keohane’s Capital and the Common Good has received lots of great coverage over the past couple weeks, starting with a review by Brenda Jubin at Seeking Alpha. Jubin claims that “[t]his book may not be an antidote to the constant barrage of attacks on the financial industry, but it shows that finance can be, and often is, allied with the interests of the public good.”

On October 3, Keohane was interviewed by Diane Horn on the Sustainability Segment of Mind Over Matters on KEXP Seattle.

Keohane has also written a number of articles about the use of innovative finance in helping to solve major world issues, including climate change mitigation; health, disaster response, and poverty reduction; and the global refugee crisis.

If you are in New York City next week, please come see Georgia at Columbia Business School where she will discuss how innovative finance is tackling the world’s most urgent problems. Capital and the Common Good 10/17 at Columbia Business School, Uris Hall, Room 322 at 6:30pm. You can find more information about the event at the website of the Tamer Center for Social Enterprise.

Thursday, October 13th, 2016

Investing in Hope: Innovative Finance for the World’s Refugees

Capital and the Common Good

“Yet we have seen how interventions that view refugees as potential assets, not liabilities, are not only cost-effective, but the seeds of prosperity and peace.” — Georgia Levenson Keohane, Andrew Billo, John Kluge and Christine Mahoney

This week, our featured book is Capital and the Common Good: How Innovative Finance Is Tackling the World’s Most Urgent Problems, by Georgia Levenson Keohane. Today, we are happy to share an excerpt from an article by Keohane, Andrew Billo, John Kluge and Christine Mahoney that was originally posted at New America.

Don’t forget to enter our book giveaway for a chance to win a free copy of Capital and the Common Good.

Investing in Hope: Innovative Finance for the World’s Refugees
By Georgia Levenson Keohane, Andrew Billo, John Kluge and Christine Mahoney

What if, for starters, we understood that this problem was not going to resolve itself in a matter of months and removed the basic barriers to work allowing people fleeing their homes— a dislocated but often skilled labor force—to contribute, productively, to their new communities? This is not a simple task; in places like Lebanon, already high unemployment means that absorbing millions of working age Syrians is economically, and politically, complex.

Yet we have seen how interventions that view refugees as potential assets, not liabilities, are not only cost-effective, but the seeds of prosperity and peace. Consider the recent aid-for-trade deal between the European Union and Jordan, home to 650,000 Syrian refugees. Jordan will issue work permits to Syrians—20,000 issued to date, another 78,000 forthcoming—in exchange for EU aid and relaxed import duties for Jordanian manufacturers who employ Syrians. (more…)

Wednesday, October 12th, 2016

Fighting Deforestation and Climate Change

Capital and the Common Good

“REDD was originally premised on the idea that forest conservation could attract significant financial resources by allowing verified reductions in emissions to generate credits that could be used for compliance in cap-and-trade programs in other countries. With the delayed development of these compliance markets in places like the United States, the REDD framework has evolved as a kind of innovative finance development assistance, relying primarily on public sources of funds.” — Georgia Levenson Keohane

This week, our featured book is Capital and the Common Good: How Innovative Finance Is Tackling the World’s Most Urgent Problems, by Georgia Levenson Keohane. Today, we are happy to present part of an excerpt from Capital and the Common Good, originally posted at impactalpha, in which Keohane looks at the way that REDD (Reducing Emissions from Deforestation and Forest Degradation) is attempting to combat deforestation in Brazil through innovative finance.

Don’t forget to enter our book giveaway for a chance to win a free copy of Capital and the Common Good.

Fighting Deforestation and Climate Change: REDD Financing Lessons from Brazil and Indonesia
By Georgia Levenson Keohane

REDD — Reducing Emissions from Deforestation and Forest Degradation — is a pay-for-success program designed to create economic incentives to protect forests and the carbon they contain. First introduced into the UN climate talks in 2005, by scientists and environmental advocates from Brazil and the U.S. using the term “Compensated Reductions,” REDD has evolved to include a range of innovative financing approaches to reduce emissions related to deforestation.

The motivation behind REDD is as much long-term sustainable development as it is forests per se. Among the primary drivers of growth in countries like Brazil have been the development of commodities like palm oil, soy, and beef, often through deforestation—clearing trees to raise crops and cattle. REDD’s pay-for-success design is meant to motivate less carbon-intensive production. That means improving economic output while decreasing emissions. (more…)

Tuesday, October 11th, 2016

Innovative Finance and the Visible Hand

Capital and the Common Good

“In this book, we will examine how creative configurations of nonprofit, commercial, and public-sector entities come together to harness market forces in the face of market failure. When these partnerships develop new or improved ways to pay for investments in public goods and social and economic development, we call it innovative finance.” — Georgia Levenson Keohane

This week, our featured book is Capital and the Common Good: How Innovative Finance Is Tackling the World’s Most Urgent Problems, by Georgia Levenson Keohane. To start the week’s feature, we are happy to present the book’s introduction, in which Keohane introduces the concept of innovative finance.

Don’t forget to enter our book giveaway for a chance to win a free copy of Capital and the Common Good.

Monday, October 10th, 2016

Book Giveaway! Capital and the Common Good, by Georgia Levenson Keohane

Capital and the Common Good

Capital and the Common Good shows we are living in a time where financial tools can expand to solve some of the world’s most vexing problems. This book is packed with information and inspiration.” — Robert J. Shiller, Nobel Laureate in Economics

This week, our featured book is Capital and the Common Good: How Innovative Finance Is Tackling the World’s Most Urgent Problems, by Georgia Levenson Keohane. Throughout the week, we will be featuring content about the book and its author on our blog as well as on our Twitter feed and our Facebook page.

Thursday, August 11th, 2016

1976: GEICO (Government Employees Insurance Company)

Inside the Investments of Warren Buffett

“Buffett began researching GEICO out of curiosity, leading to the much-cited anecdote of a young Buffett visiting GEICO’s headquarters on a Saturday morning when the premises were empty except for a janitor and an investment officer named Lorimer Davidson. Davidson later became CEO, and Buffett eventually became owner of the entire company.” — Yefei Lu

This week, our featured book is Inside the Investments of Warren Buffett: Twenty Cases, by Yefei Lu. Today, we are happy to provide an excerpt from Lu’s chapter on one of Buffett’s most famous investments: GEICO.

Enter our book giveaway for a chance to win a free copy of Inside the Investments of Warren Buffett!

Wednesday, August 10th, 2016

1958: Sanborn Map Company

Inside the Investments of Warren Buffett

“For someone considering investing in Sanborn Maps when Buffett was investing, the assessment likely would have been as follows: Sanborn was a near-perfect business for a long time, a sole provider of a critical service, with high returns on capital; however, in the last several years prior to 1958, the business had faced serious substitution by newer technology, which had clearly and significantly eroded its core business within the fire insurance industry.” — Yefei Lu

This week, our featured book is Inside the Investments of Warren Buffett: Twenty Cases, by Yefei Lu. Today, we are happy to provide an excerpt from Lu’s chapter on one of Buffett’s earlier investments: the Sanborn Map Company.

Enter our book giveaway for a chance to win a free copy of Inside the Investments of Warren Buffett!

Tuesday, August 9th, 2016

Introducing “Inside the Investments of Warren Buffett”

Inside the Investments of Warren Buffett

“Buffett’s legendary investing performance has prompted small investors to want to invest just like him and many investment professionals seek to emulate his strategies. But what are Buffett’s greatest investments and in which context did he make them? Moreover, what can we learn from his experience?” — Yefei Lu

This week, our featured book is Inside the Investments of Warren Buffett: Twenty Cases, by Yefei Lu. To start the week’s feature, we are happy to present an excerpt from the book’s introduction, in which Lu explains what he wants to answer and how he’s laid out Inside the Investments of Warren Buffett to best address those questions.

Enter our book giveaway for a chance to win a free copy of Inside the Investments of Warren Buffett!

Over the last thirty years, Warren Buffett and his investment vehicle Berkshire Hathaway have become household names. Likewise, Omaha, Nebraska is no longer an unknown midwestern town for anyone in the investment community. Buffett’s legendary investing performance has prompted small investors to want to invest just like him and many investment professionals seek to emulate his strategies. But what are Buffett’s greatest investments and in which context did he make them? Moreover, what can we learn from his experience?

The focus of this book is to uncover answers to these questions by journeying through Buffett’s investing career. Specifically, I look at the twenty investments Buffett made that I feel had the largest material impact on his trajectory. I selected a cross-section of different types of investments and investments I found especially informative. I also considered the relative size of each investment at the time it was made. (more…)

Monday, August 8th, 2016

Book Giveaway: Inside the Investments of Warren Buffett!

Inside the Investments of Warren Buffett

“Warren Buffett has talked extensively about his investment philosophy but unfortunately less so on actual investments. By digging up long forgotten annual reports and sharing his own thoughtful insights, Yefei Lu does an excellent job of filling in the missing pieces of the puzzle in understanding how Buffett invests.” — Robert Vinall, CEO, RV Capital

This week, our featured book is Inside the Investments of Warren Buffett: Twenty Cases, by Yefei Lu. Throughout the week, we will be featuring content about the book and its author on our blog as well as on our Twitter feed and our Facebook page.

We are also offering a FREE copy of Inside the Investments of Warren Buffett. To enter our book giveaway, simply fill out the form below with your name and preferred mailing address. We will randomly select our winners on Friday, August 12th at 1:00 pm. Good luck, and spread the word!

Friday, February 19th, 2016

The First Financial Commandment for the 21st Century: “Thou Shalt Not Plead Total Investment Ignorance”

Investment: A History

“If people knew their history, they would marvel at the sheer range of investment opportunities now available to them. The idea that investing has become democratic probably feels alien to most people, but investing is extremely democratic today compared to past eras. So it is incumbent on the average person to learn enough to be his or her own best advocate in taking advantage of all this new-found opportunity.” — Norton Reamer

This week, our featured book is Investment: A History, by Norton Reamer and Jesse Downing. For the final post of the week’s feature, Reamer and Downing explain their first financial commandment for today’s investors: “Though Shalt Not Plead Total Investment Ignorance!”

Don’t forget to enter our book giveaway for a chance to win a free copy of Investment: A History! You can also learn more about the book and its authors on the Investment: A History webpage and Youtube channel!

The First Financial Commandment for the 21st Century: “Thou Shalt Not Plead Total Investment Ignorance”

For thousands of years, the only people who qualified as “investors” were wealthy and politically connected landowners. Investment opportunities were few and accessible only to the elite. Yet in the blink of an eye, historically speaking, that world has been replaced by one full of investment opportunities for “everyman,” from stocks and bonds, to mutual funds, to life insurance, to pension plans, to real estate, and many other vehicles for investment.

“If people knew their history, they would marvel at the sheer range of investment opportunities now available to them,” says Norton Reamer, co-author of Investment: A History. Reamer is also the founder of United Asset Management and former CEO of Putnam Investments. “The idea that investing has become democratic probably feels alien to most people, but investing is extremely democratic today compared to past eras. So it is incumbent on the average person to learn enough to be his or her own best advocate in taking advantage of all this new-found opportunity.” (more…)

Friday, February 19th, 2016

Moments in Investing History You’ve Never Heard Of

Investment: A History

This week, our featured book is Investment: A History, by Norton Reamer and Jesse Downing. Today, on the final day of the feature, we are happy to present a short series of Youtube videos produced by the Investment: A History team that take a closer look at turning points in the history of investing that may not be as well-known as they should be. You can see all these videos and more on the Investment: A History Youtube channel!

Don’t forget to enter our book giveaway for a chance to win a free copy of Investment: A History! You can also learn more about the book and its authors on the Investment: A History webpage!

When Social Security Almost Wasn’t

(more…)

Thursday, February 18th, 2016

Savvy Investors Look Back at the History of Investment for Lessons for 2016

Investment: A History

“The key is that successful investors throughout history have stuck to a few basic principles. As complex as investing can be, it is, at the same time, possible to avoid some obvious mistakes.” — Norton Reamer

This week, our featured book is Investment: A History, by Norton Reamer and Jesse Downing. As they explain in today’s post, Reamer and Downing wrote Investment: A History in part to provide investors with a historical perspective that could help them find smarter ways to invest.

Don’t forget to enter our book giveaway for a chance to win a free copy of Investment: A History! You can also learn more about the book and its authors on the Investment: A History webpage and Youtube channel!

New Year’s Resolution for Savvy Investors: Look Back at The History of Investment for Lessons for 2016

Thinking about how to improve your portfolio in 2016? Don’t forget the last three thousand.

A healthy understanding of investment history is a true bonus for investors – lay and professional alike – to avoid pitfalls and to be the best advocates for their own financial interests. Whether it’s running a personal retirement account or a university endowment, ancient history has lessons for portfolios today.

That’s according to Norton Reamer and Jesse Downing, co-authors of Investment: A History. Reamer is also the founder of United Asset Management and former CEO of Putnam Investments, and Downing is an investment professional in Boston. The book traces the history of investment, from the ancient world to the present day, and draws lessons for today’s investors at all levels.

Reamer and Downing note that for thousands of years, the only people who qualified as “investors” were wealthy and politically connected landowners. Yet in the blink of an eye, historically speaking, that world has been replaced by one full of investment opportunities for average people – stocks and bonds, mutual funds, life insurance, pensions and real estate.

“The key is that successful investors throughout history have stuck to a few basic principles,” says Reamer. “As complex as investing can be, it is, at the same time, possible to avoid some obvious mistakes.”

Reamer and Downing have identified four guideposts that can help investors in 2016:

1. Focus on what’s “real” – Don’t get distracted by the form of an investment (e.g., a stock certificate or a bond note). Make sure you understand the real asset behind the piece of paper, such as the company behind the stock you are buying, or the public works project issuing the bond. When buying a mutual fund or other packaged investment the same rule applies: make sure you understand the fund manager’s criteria for buying and selling securities in the portfolio. Focusing on what’s “real” should always be the priority.

2. Focus on fundamental “value” – In its simplest form, the value of an investment today is determined by the present value of its future cash generation – that is, the future cash that the investment will produce over its lifetime. Don’t be distracted by market gyrations. Take a long-term perspective and understand that markets go up and down, often for reasons other than fundamental value. Investors often forget this basic rule and allow emotion to guide their decisions – and make mistakes as a result.

3. Consider the intelligent use of leverage – Excessive leverage is dangerous, but most of the great fortunes in history were built using moderate and smart amounts of leverage. For example, a home mortgage is a sensible form of leverage for most families. On the other hand, taking out a second mortgage to fund a speculative investment is probably foolhardy.

4. Allocate your capital – Every investment is an “allocation” of capital. That is, it’s a choice between competing priorities and opportunities. Make informed, deliberate choices and tradeoffs as you decide where to put your money – especially when the choice is between saving, spending, and investing. Think through your needs. Do your best to be accountable to yourself. Set some objectives and stick to them.

“Investment is one of humanity’s most fundamental activities, and in the modern world it’s open to more people than ever before,” adds Downing. “We encourage everyone to learn some basic investment principles and take full advantage of this unprecedented opportunity.”

Thursday, February 18th, 2016

Five Archetypal Investing Mistakes That Have Bedeviled Investors Through the Ages

Investment: A History

“Decade after decade, we see markets collapse and fortunes vanish for the same basic reasons. Most of the time the root cause is not some complex technical error. It’s just some new flavor of poor judgment.” — Norton Reamer

This week, our featured book is Investment: A History, by Norton Reamer and Jesse Downing. In today’s post, Reamer and Downing break down the five investing mistakes that they see repeated again and again throughout the history of investing.

Don’t forget to enter our book giveaway for a chance to win a free copy of Investment: A History! You can also learn more about the book and its authors on the Investment: A History webpage and Youtube channel!

Five Archetypal Investing Mistakes Have Bedeviled Investors Through the Ages

For thousands of years, investors have been making the same mistakes over and over. So true financial literacy should include not just understanding the history of investment successes, but also investing failures. Unfortunately, the recent history of the financial crisis and Great Recession indicate that many investors—even professionals—have not learned those lessons.

“Decade after decade, we see markets collapse and fortunes vanish for the same basic reasons,” says Norton Reamer, co-author of the new book, Investment: A History (Columbia Business School Publishing, February 2016). “Most of the time the root cause is not some complex technical error. It’s just some new flavor of poor judgment.” Reamer is the founder of United Asset Management and Asset Management Finance, and he is the former CEO of Putnam Investments. His co-author, Jesse Downing, is an investment professional in Boston.

Mistake #1: Not diversifying enough

“In plain language, diversification means not putting all your eggs in one basket,” says Reamer. “One of the biggest advancements of the last few hundred years has been the ability to truly diversify one’s investments. Diversification is what makes modern investment portfolios tick.”

As a historical reference point, Reamer points to 14th-century Italy, before there was such a concept as “too big to fail.” Two major Florentine banking houses, the Bardi and the Peruzzi, poured a great deal of their capital into the wartime exploits of England’s King Edward III. When Edward defaulted, both banks failed.

According to Reamer, the goal of diversification is to ensure that even if one asset in the portfolio is underperforming, other assets are still potentially delivering gains. Both the Bible and Shakespeare reference diversification, and despite how ancient the wisdom may be, it can be hard to follow. Many homeowners have a significant portion of their wealth tied up in a single asset, such as a home, company-granted stock, or even a single asset class. To weather the inevitable vagaries of the market, one must diversify. (more…)

Wednesday, February 17th, 2016

The Investment Challenge

Investment: A History

“This book is not about how to manage investments; rather, as a history of investment and the activities related to it over the centuries, it adds vital perspective to issues in investment management. It traces the development of investment from the earliest civilizations where agricultural land, lending, and trade activities were the economic foundation; to the creation of basic financial, collective, and charitable investment forms; and through the innovation of a vast array of specialized vehicles and funds extending into the twenty-first century.” — Norton Reamer and Jesse Downing

This week, our featured book is Investment: A History, by Norton Reamer and Jesse Downing. Today, we are happy to present an excerpt from “The Investment Challenge,” Reamer and Downing’s Introduction to Investment: A History.

Don’t forget to enter our book giveaway for a chance to win a free copy of Investment: A History! You can also learn more about the book and its authors on the Investment: A History webpage and Youtube channel!

Tuesday, February 16th, 2016

A conversation with Norton Reamer and Jesse Downing, authors of “Investment: A History”

Investment: A History

“[T]he basic principles of investing are timeless, even as the economic and social stakes grow higher. The challenge will be to harness all that increasing sophistication to further push the democratization of investment, and in that regard we are optimists.” — Norton Reamer and Jesse Downing

This week, our featured book is Investment: A History, by Norton Reamer and Jesse Downing. In the first post of the week’s feature, we are happy to present an interview with Reamer and Downing in which they discuss their goals for the book, important changes in the history of investing, and what the future holds for investors.

Don’t forget to enter our book giveaway for a chance to win a free copy of Investment: A History! You can also learn more about the book and its authors on the Investment: A History webpage and Youtube channel!

What will readers find in Investment: A History?

The book explains key elements in the long history of investment. Each chapter includes important stories and lessons that are intended to illustrate crucial dimensions of the investment world, as they have developed over the centuries. Our goal is to increase understanding of the investment practices and opportunities of today by understanding the history of investing.

In broad scope, what are the most important findings in the book?

Most people will be surprised to find out how remarkably uncomplicated it is to be a sensible investor, and in that regard we identified four basic investing principles. First, look at every investment as “real.” That is, when you invest, you own the underlying asset—e.g., with stocks you are buying a piece of a corporation. Don’t be distracted by the paper form of the investment. Understand the basics of whatever entity you are buying.

Second, it’s all about fundamental value, where “value” is determined by the value today of future cash flows that the investment may produce over its lifetime. Third, intelligent use of financial leverage is a legitimate tool for investors; in fact, it has helped build most of the great fortunes of history. Of course, excessive leverage can be extremely dangerous because all leverage will multiply returns—either positively or negatively. Finally, the most basic management skill is resource allocation: i.e., the effective allocation of capital and human resources.

Investing did not always exist in its current form. What were the precursors to the current investment landscape?

With ancient and pre-modern investment, we emphasize three areas: the basic investment vehicles of early history; the extreme inequality in the distribution of investment opportunity and benefit; and the surprising sophistication of some early investment vehicles, strategies, and purposes.

We believe that, to grasp the reality and significance of investment as a fundamental human activity, it’s necessary to begin in ancient times and understand the roles of agricultural land, lending and trade in the ancient world. At the same time, it is important to acknowledge that by today’s standards, it took an astonishing amount of wealth and power to even qualify to be an ‘investor.’ Finally, we felt it was essential to understand that in some respects—despite a lack of investment diversity and the absence of equality—investment even in those early days had features that were remarkably sophisticated and prescient. (more…)