16 books like Barbarians at the Gate

I love this book because it reads like a fictional tale about the modern financial markets, and yet it’s all absolutely true!

I am still staggered by some of the stories that Lewis tells about the real-life characters who worked on Wall Street back in the 1980s. And I’m in awe of the colorful way he describes and explains the way the bond markets work—no easy task.

Not only did he bring the go-go days of the 80s to life for me, but he also gave me a solid grounding in the machinations of the financial markets, helping me in both my writing and journalism careers.

This fascinating read tells the story of the rise and then spectacular fall of the once celebrated hedge fund Long-Term Capital Management.

What made LTCM so attractive to Wall Street investors was its stable of "dream team" quants and financial minds, led by the laconic John Merriweather. Merriweather (featured in the opening Chapter of Liar's Poker) was a former Solomon Brothers bond-trading guru, who after leaving the firm amid a scandal managed to assemble a team of financial powerhouses that included two Nobel Laureates as well as a cadre of respected traders.

From 1993 to 1997 LTCM's returns were first-rate; the sky seemed the limit for this small band of supertraders, professors, and modelers who arrogantly considered themselves a cut above the rest of The Street.

But in 1998, it all came crashing down...and right quick. Having believed their financial models could accurately predict price action not just in… show more.

A history of hedge funds might seem like a weird recommendation by someone who has written a paean to passive investing.

But my favourite books use a subject to tell a much broader story, and Mallaby’s definitive book on the hedge industry manages to show how even the most illustrious investing careers can fizzle out as market regimes ebb and flow.  

Mr. Carreyrou was the Wall Street Journal reporter who broke the story that eventually led to the downfall of Elizabeth Holmes, CEO of Theranos. At its peak, this company was worth over $9 billion. Today, Holmes and her former COO have been convicted of fraud and are serving time.

I like this book because it serves as a curriculum for how NOT to operate a biotech company. It shows that while belief in your vision is essential for all successful entrepreneurs, there is no place for secrecy and arrogance in the business world.

Unfortunately, the “Theranos” effect has led to a decline in investment in new medical technology and has had a negative effect on the value of clinical laboratories.

Of all the books about trading written over the decades, perhaps none is still so beloved, revered, and followed as this 1923 classic by journalist Edwin Lefèvre. Although technically a work of fiction, the book really is about the life and trading style of one of the greatest speculators of all time, Jesse Livermore (told under the guise of “Larry Livingston”).

What makes this book such a treasure is not just its fun prose, and interesting glimpse into what the process of investing in old exchanges and “bucket shops” was over a century ago, when ticker-tape and board boys with chalk and ladders were one’s only information about market prices, but also how the mind of one of the world’s greatest traders worked.

This book offers many gems of knowledge about trading—based upon the general principle that, although methods and technologies change, human nature does not and therefore “there is… show more.

A relatively new arrival on the list, Dreyfuss’s diligently crafted book is the most in-depth look at one of Wall Street’s most spectacular, if lesser-known, collapses in 2006.

The book takes us through the rise of two forces in energy trading embarking on a collision course that would be the ruin of one and an immense windfall of the other. Amaranth hedge fund was an up-and-comer and darling of the hedge fund space. Boasting stellar returns on its several billion in capital, it was able to raise massive sums to hand over to its wunderkind energy trading guru, the Canadian Brian Hunter.

Hunter had set out to dethrone John Arnold at Centaurus (the former Enron whiz kid and youngest member of the Forbes 400) as the biggest energy derivatives trader on the Street. Hunter’s ego soon got him into trouble when a series of disastrous and massively overleveraged bets collapsed,… show more.

It might seem odd, but there is no real better book than this one to illustrate the challenges of private equity. I use it as an example in my training sessions regularly.

The Merchant of Venice is not only one of the best plays on finance and ethics, but also the perfect illustration of the challenges of start-up investing before it became a profession. This play illustrates how venture financing differs in practice from bank financing. It also conveys the uncertainties associated with entrepreneurship, and how some capital providers are not able to take such a risk.

Shakespeare masters the art of contrasting the perspectives of an entrepreneur and a banker in a short and powerful format. It is a masterpiece and a must-read for anyone who wants to understand the philosophy of start-up investing. 

This is, for want of a better word, financial porn.

It won’t explain the underlying issues or even proximate triggers for the global financial crisis of 2008, but no one has ever written a financial book as titillating as Too Big to Fail. Sorkin really brings you into the rooms of power and conveys the sweaty panic that gripped the financial system as it careened over the edge. 

Peter Bernstein was one of the great investment writers.

This book is where I got my first taste into the great theorists whose works revolutionized Wall Street such as Harry Markowitz, Bill Sharpe, Myron Scholes, and Bob Merton, all of whom I later had the pleasure of getting to know. I had read about their theories, but hadn’t appreciated the impact they had on the investment industry. Bernstein showed how these luminaries changed the way we think about investments.

Sometimes the obvious pick is still the right pick, and anyone interested in the history of financial shenanigans – outright frauds or merely weapons-grade idiocy – has to read Kindleberger.

There’s a reason why it remains a stone-cold classic that bears reading (and re-reading) almost half a century after it was first published.