20 books like World-Class Risk Management

I laughed at Kahneman’s straightforward explanation of how my brain works without making me feel stupid. Apparently, humanness is normal, thank goodness.

He explains the complexities of System 1 and 2 thinking through storytelling, demonstrating what he is teaching about how our brains work. Even though I’d learned about these concepts through academic reading, I now feel like I “get it,” although even that statement is a product of both System 1 and 2 thinking and availability bias. Key takeaways: Intelligence and rationality are not the same, and the research is so substantial in how Systems 1 and 2 work that disbelief is not an option!

Reading this book a second time, I felt my anger growing from a lifetime of hearing the Church’s teaching on fear: “Ignore it.” This is at least negligence and, at worst, abuse. De Becker makes it abundantly clear that we should listen to our fear (he differentiates it from anxiety) and learn to trust the inner voice (intuition).

We are “experts” in our situation, and he skillfully showed me how to listen to myself and see the signs of danger. I realize I need to re-read the final chapter to integrate the common wisdom of knowing myself, seeing danger, and understanding how fear works. It is possible to have faith in God, manage my fear, and more likely avoid violence without resorting to trite spiritual naivete or blind faith in God.

I loved being challenged with the idea that there is something beyond resilience, that strength can be redefined as antifragility, and the application of this concept is infinite. Often shocked and kept off balance by the unorthodox words he created and paired, the uncertainty as he jumped from ancient Greece to the 21st century in one paragraph, I was forced as a reader to analyze old ideas through a novel lens.

I admit I feel a little smarter and less fragile, but I am still a novice as a flâneur. I agree with “I’d rather be dumb and antifragile than extremely smart and fragile, any time,” though I don’t pretend to understand everything Taleb means by this. Thankfully, he left a glossary of all his innovative words.

The summons to think in new ways and develop new awareness is a challenge I loved in this book. Gigerenzer distinguishes between an inner spiritual voice, intuition, and rational thinking: these are different ways of knowing and should be honored.

His numerous examples of the 3 critical skills for developing risk literacy are provocative but comprehensible. I’m encouraged to learn that my intuition in situations of uncertainty is often correct, and I should listen to it, even if I cannot immediately explain why. Why does this matter? The places where humanitarian relief work focuses are often highly unstable and dangerous. I must be able to explain how to do a risk assessment in less than fifteen minutes and make a quality risk decision.  Otherwise, it’s not helpful (simple solutions for complex problems).

For financial market practitioners, it would be unwise not to deeply care about the various financial risks associated with their uses.

This book thoroughly covers the whole set of such financial risks, i.e. market risk, credit/counterparty risk, liquidity risk (both on the asset and liability sides), broadening the subject up to the firmwide level risk. It goes both into theoretical and practical considerations (risk management of a portfolio of financial instruments), illustrated by useful examples, with a great pedagogical sense. 

We’ve all felt like a Cassandra at times, imploring people to see the obvious disaster to come - only to be ignored.

And even when that disaster as predicted materializes, we are rarely credited for having successfully seen what others could not so easily imagine. That said, for every accurate prediction, there are dozens, if not hundreds or even thousands of predictions that prove false.

As risk managers, our job is to reduce uncertainty by predicting the future as accurately as possible. So how do we sift through the chatter and find the most accurate warnings?

This book, written by former national security experts, offers an interesting methodology that can help us do that.  

Forget bromides such as buying a stock because your experience with the company’s product has been good. The hugely successful money manager Howard Marks makes the essential point that the goal is not to find good companies but to make good purchases. “It’s not what you buy,” he says, “it’s what you pay for it.”  Investors who are interested in good outcomes rather than thrills will find many more sound principles in this book.

This was a real eye-opener for me when it appeared, because instead of the usual strictly modern-day stories about risk, Bernstein’s story begins with ancient Greek traditions when “risk” was luck and restricted to gambling, and the rest of life was a matter of fate.

He weaves together the invention of Arabic numbering and the Hindu zero, the emergence of scientific experimental methods, and the invention of probability theory, in explaining the evolution of the notion of risk. 

As the story moves into the modern era, Bernstein tracks the major practical applications of risk in addition to its conceptual development. And this is no dry historical recitation. Bernstein brings to life the major players, their hopes, dreams, capabilities, and flaws. This book is an absolute page-turner. 

Mark Minervini is undoubtedly one of the greatest traders to ever live. This book is an absolute gem, building on what O’Neil wrote in his book. Minervini has gotten his trading down to absolute precision, from when to buy, when to sell, and how to screen for stocks. It’s all in here. A must-read for anyone looking to learn about trading.

I started working at Depository Trust Company in New York in September 1987 – a month later the “Black Monday” stock market crash happened! At the time, it was very difficult to see exactly what caused it. “When you are up to your neck in alligators, it is hard to remember why you drained the swamp!” This book explains how Wall Street banks hatched all those alligator eggs by hiring MIT math-whizz-kids and turning them loose without explaining the simplest thing about the stock market to them. One of the errors in their models was that they did not take bank holidays into account when calculating the time value of stocks and option prices.