Although we’re just five months into 2017, I’ve focused on the notion of building a foundation in the new year, as well as looking to the future. It’s with these concepts in mind that I’ve approached my 2017 reading list and come up with a selection of books that encompasses economic fundamentals, modern international economics, and the art of market forecasting.
For 2017, my colleagues and I – including some of the interns who run their own book club here at Russell Investments – offer the following recommendations for your summer reading list.
The Wealth of Nations
Adam Smith is widely regarded as the father of modern economics. Smith’s 1776 An Inquiry into the Nature and Causes of the Wealth of Nations presents the basic economic theories that have been expanded upon to shape both our current understanding of market economics and the present design of the political economy in which we operate.
As theories, Smith’s ideas, such as supply and demand, division of labor, pursuit of self-interest, the invisible hand, etc., are aggregated observations with implications that can only be fully appreciated in the context of a unique time and space. It is from a perspective framed by the paradigms of the Scottish Enlightenment and Industrious, or pre-industrial, Revolution, that Smith sought to understand the world around him. Smith’s writings are colored by his humanist inclinations of reason and ingenuity for the greater good of society, combined with the patterns of increased consumption and demand leading up to the Industrial Revolution. This translation into “modern English” accurately captures these sentiments in legible verbiage.
While the impact of Smith’s ideas are not to be undervalued, the awareness of his reality contrasted to ours is a humbling reminder that as the world continues to spin, we must preserve the tradition of economics as a science and the virtue of objective observation.
Superforecasting: The Art and Science of Prediction
Having dedicated the majority of our professional careers to financial markets, we like to think we have a pretty decent understanding of how the world works and what makes these markets tick. But do we? Statistically, no. But according to Wharton Professor Philip Tetlock and co-author Dan Gardner, who spent years conducting their seminal research via a massive government-funded prediction tournament, accurate forecasting is a skill that can be practiced and improved upon.
This skill, according to Tetlock, is rooted in one’s mindset relative to consuming information. The mindset portion of the formula requires a level of cognitive awareness oftentimes overshadowed by our industry’s fascination with numbers and algorithms. Based on the psychological understanding of a “growth mindset”, a mindset in which an individual believes their skills, knowledge, etc. can be improved (contrasted to a “fixed” mindset), Tetlock explains that superforecasters exhibit high levels of self-reflection, grit, and willingness to learn from past mistakes.
By nurturing these traits, consuming current information, and exposing oneself to a balanced diversity of perspectives, Tetlock attests individuals can more effectively synthesize information to make accurate predictions. The authors also discuss the construction of teams and the difficulty in finding individuals who strike the elusive balance of high levels of leadership and the unique “superforecasting” skillset. If you’re looking for a self-improvement project in 2017, reading this book and trying your hand at the “Good Judgement Project” (on which Tetlock’s empirical research is based) is an excellent choice.
Why Globalization Works
In a climate where protectionism is at the forefront of political dialogue, Martin Wolf presents a compelling defense for the continued advancement of globalization. As a leading international economist and chief economics commentator at the Financial Times, London, Wolf offers insight into the flawed arguments of opposition groups while painting a clear picture of how globalization actually works and why it benefits our global market economy. I recommend this book to anyone looking to further develop and deepen their worldview.
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