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Monday, March 26, 2007

In An Uncertain World

I have another book recommendation to make: Robert Rubin's In An Uncertain World.

Rubin was Bill Clinton's Secretary of Treasury from 1995 to 1999. The reason why I really like the book has little to do with politics, and everything to do with investing.

Rubin worked on Wall Street at Goldman Sachs long before he became Treasury Secretary. While there, he learned the fundamental principles of investing, and put them to work doing risk arbitrage for Goldman.

He does an excellent job spelling out how he thinks in terms of probabilities, and how this thinking is equally applicable in investing, politics, and life. If you can consider the potential outcomes in a situation, and you can apply reasonable probabilities to each, it allows you to make good decision in any facet of your life.

The principles of probabilistic thinking in investing are simple, but the judgment and analysis required are hard. If you know a security has a 25% chance of going to zero, a 25% change of being flat, a 25% chance of going up 20%, and a 25% chance of going up 100%, then it's easy to figure out whether it's a good investment or not. The math of probability is easy, figuring out what the probabilities and outcomes will be is hard.

But, Rubin does a great job of describing this way of thinking. He even gives concrete examples to make it clear both in investing and in politics.

I must admit, it's an enjoyable read, too. I don't agree with everything he has to say, but you can't help finishing the book and thinking that Rubin is a thoughtful, well meaning person. I highly recommend the book to anyone.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

1 comment:

Anonymous said...

now I among your readers