"Cityboy" by Geraint Anderson

Perhaps a memoir, perhaps a roman a clef, Cityboy recounts the progress of a young man who started working for a bank in the City of London in 1996, became arrogant, hedonistic and wealthy, fuelling his success with a cocaine addiction and enormous amounts of alcohol, while understanding that he was nothing more than a gambler in a casino whose stake was supplied by others. It is a classic Faustian tale (it starts: “Everybody sells their soul to the devil ... I just decided that I'd get a damn good price for mine.” C 1) except that the narrator manages to escape the hell into which he has fallen. 

He is scathing about his (now former) profession. He and his colleagues lie and cheat and break almost all of the rules; he suggests that it is the system which both allows and encourages arrogance and recklessness and the easing of regulations has led directly to the market crashes. He concludes:

• “Money as the one true God and the Gospel according to Adam Smith became the only one that anyone now listens to.” (C 5)
• “Capitalist economies can only survive if they grow and that requires people to be dissatisfied because only people desperate for material betterment will buy that flashier car or that smarter jacket ... The trick is to make people as unhappy about themselves as possible so that they strive to spend the cash in the false hope that it will make me happy and sexy.” (C 5)
• “Our masters have successfully employed clever propaganda to feed our pathetic obsession with celebrities and so distract us from unjustifiable wars and hideous unfairness of our socio-economic system.” (C 5)
• “We live in a superficial bling bling society that is neither happy nor peaceful.” (C 5)

Yet, throughout, even while describing in remorseless detail his drug habit, his exploitation of friends and women, and his appalling lack of any sort of professional standards, one still roots for him. He is a lad and his misdemeanours are told to the accompaniment of laddish (sometimes nakedly sexist, if one is allowed that adverb in that context) laddish banter:

• “Stress will kill you quicker than a rabbit gets fucked.” (C 1)
• “To say I made a tit of myself would be to insult mammary glands across this planet.” (C 1)
• “Body from Baywatch but face from Crimewatch.” (C 2)
• “The chances of that happening are somewhere between slim and none, and as far as I can see slim left town a long time ago.” (C 2)
• “I didn't just look (and feel) like the living dead; I looked like the dead dead.” (C 3)

These are a very few samples from an enormous potential selection. There are many times when 'laddish' becomes uncomfortably misogynist. And yet ... he portrays himself as flawed but better than others; most importantly, he is the one who analyses the game he is playing as fundamentally destructive to the players and to the economy and the hard-earned pennies of the people who allow these greedy fools to play with their money. Perhaps his epiphany comes when he visits a prison in Bolivia: “In San Pedro money could literally buy you anything, but a lack of it meant you had nowhere to sleep and that you could lose your life at the drop of a hat. It was an existence entirely dictated by unmitigated market forces. There was no welfare state or NHS diluting true ‘dog eat dog’ capitalism here. It was the ultimate untainted capitalist state where the law of the jungle ruled ... and it was horrific. They were four murders a month and anyone without cash lived in a state of constant fear. ... It seemed to me that the elites of Western societies had cleverly ensured that the states we live in had the bare minimum of support mechanisms in place. They had done this so that capitalism would thrive, ensuring that their privileged life continued, but it was also not so unremittingly harsh that an underclass existed with so little hope that they would attempt mass insurrection.” (C 6)

Other great moments:

• “I was talking about some really important stuff like how great I was and he was refusing to participate in this extremely interesting discussion. In fact, he was banging on about some fairly pointless subject - something about how fabulous he was or some such nonsense.” (C 5) The self-obsession of those who have been snorting cocaine
• “They say you make your own luck but sometimes you ain't got nothing to do with it.” (C 6)
• “Watching corpulent buffoons wearing appalling sports jackets actually believing that the fit young totty they’re chatting to at dreadful clubs in Soho with interested in anything other than their wedge would be humorous were is not so tragic.” (C 1)
• “In the country of the blind drunk, the one-eyed trouser snake is king.” (C 7)

January 2020; 419 pages

"The Ascent of Money" by Niall Ferguson

This book is subtitled A Financial History of the World and tells the story of finance from Mesopotamian days to the 2007 credit crunch. It accompanies a Channel Four TV series, traces of which can be seen in the prose (there are frequent references to places which are clearly camera shots: the East End of Glasgow, Memphis, and Stowe House for example).

It is not organised as history but in themes (presumably the programmes). Thus: one chapter considers government bonds, one traces the history of shares, one considers insurance and one property. There is a considerable emphasis on the recent turmoil on the financial markets; as a history it has a definite bias to the more recent. There are many interesting moments; I was, for example, charmed by the anti-capitalist antecedents of Monopoly. But there are also occasions when I wanted to know more, more, more: he mentions the Dutch Tulip bubble and the South Sea bubble both of which I know something about but I wanted more; he tantalisingly mentions (twice) the collapse of Overend Gurney but he never tells us what happened. Not only this but I was left floundering by his explanations of what a hedge fund is; and of put,call and swap options.

All in all this was an interesting book but not a fascinating one and it left me frustrated with a lot of unanswered questions.

July 2009, 362 pages

Fooled by Randomness by Nassim Nicholas Taleb

This book, lent to me by my brother-in-law and company lawyer Jeremy, is written by a trader in options, a business about which I understand little. His basic thesis is that most movement on the financial markets is randomly generated statistical noise which dupes us into not expecting the highly improbable.

He points out that randomness can lead to interesting scams. Supposing in January I randomly email 50,000 people with my prediction that the market will go up in the next month and 50,000 with my prediction that it will go down. In February I select those people for whom I was right in January and email 25,000 with the prediction that it will go up in February and 25,000 that it will go down. I repeat this process in March (12,500 each time) and April (6,250) and May (3,125). By the end of May there are 1,562 people convinced that I can predict the market (5 months in a row!!!) of whom maybe half would be prepared to subscribe to my premium advisory service for £50. That's nearly £40,000.

Then he analysed a situation which has a 15% return but 10% volatility (that 10% is a standard deviation so that there is a chance that some returns would lose money) and looked at the chance of such an investment making money. He used a Monte Carlo random path generator. The chance of being up on one's investment after 1 second is 50.2%, after 1 day it is 54%, after 1 month it is 67% and after 1 year it is 93%. He then points out that people hate losing money more than the like gaining it. So if you hate losing twice as much as you like gaining, after 1 second you are probably feeling rather glum; after 1 day you have 54 points of happiness to 96 points of unhappiness, after 1 month the figures are 67 happiness, 66 unhappiness so you break even but after 1 year you are in woopy do territory with 93 happy points to only 14 gloom. His conclusion is that people who monitor there investments on a moment to moment basis are going to feel unhappy and get stressed and have early heart attacks!

Then he looks at things that skew our perceptions. One example is the natural tendency of people to ignore outliers (extreme events); this can be highlighted by the difference between the mean and the median of a set of statistics (the median is an average which ignore extreme events). A second example is the tendency only to see things from history that still apply: this is like marvelling at the wonderful cathedrals from the middle ages and then generalising that "they really knew how to build in those days"; of course we can't see the cathedrals that fell down (or were replaced because they were too ugly). A third is our difficulty at calculating probabilities (he used the famous birthday paradox in which the chances of someone sharing your birthday when there are 23 people in a room is bout 50%). He points out that a lot of people spend a lot of time searching for correlations (he calls it "data mining"); clearly some correlations are caused by random effects so if you mine data long enough you will find such spurious correlations.

But he reserves most of his ammunition for conditional probabilities. If a test for a disease produces 5% false positives and the disease affects 1 in 1,000 and you randomly test a patient for the disease and the test produces a positive result what is the chance that the patient has the disease? Most doctors will answer 95% (100 - the number of false positives). Imagine you test 1,000 people. 51 will test positive but only 1 will actually have the disease. The correct answer is therefore under 2%.

NNT makes his money by betting on unlikely events. He expects to lose money most days because the events he is betting on are unlikely. But he knows that some days he will win a lot.

A very thought provoking book which I must flick through again some time to ensurer I have truly understood some difficult concepts!

Read January 2009; 230 pp