Five Best Books About Business

From a Wall Street Journal story by Burton Malkiel headlined “Five Best: Business Books”:

Naked Economics
By Charles Wheelan (2002)

1. Economic literacy gives people the tools to make better individual and social decisions about issues they will encounter over a lifetime. But the subject of economics has long been considered dismal and dry. If you slept through Economics 101 in college, this is the antidote. Charles Wheelan, a former correspondent for the Economist, writes with an engaging style. Using words, not mathematics, he makes difficult and sometimes recondite economic concepts comprehensible, entertaining—and even funny. Above all, he makes economics relevant to everyday life. If you want to understand the dilemma facing our monetary-policy makers as growth slows and inflation remains high; if you are puzzled by how markets function and how incentives and psychological instincts steer us; if you have difficulty making sense of how government policy can foster a healthy economy—this book is for you. Mr. Wheelan writes with an anti-Midas touch: If he touched gold, he would bring it to life.

Moneyball
By Michael Lewis (2003)

2. “Moneyball” describes the success of Billy Beane, the general manager of the Oakland Athletics from 1997 to 2016 who assembled a winning baseball team despite being constrained by one of the lowest budgets of any major-league team. Michael Lewis describes how the collective wisdom of baseball professionals was often flawed. New statistics such as slugging percentage and on-base average turned out to be more reliable indicators of actual future performance than traditional measures such as scouting ratings, batting average and runs batted in. Moreover, because players with excellent performance in these overlooked areas could often be obtained at lower salaries than players who excelled at the more traditional gauges, Mr. Beane could field teams competitive with those spending three times as much in payroll. His technique was later copied by the Tampa Bay Rays, who reached the World Series in 2020 despite having one of the lowest payrolls in baseball. While “Moneyball” is an influential sports story, it has wide applicability for innovators in many business fields. The broad business lesson comes through clearly: It is difficult yet potentially rewarding to go against the grain. But insightful strategies that can easily be copied will eventually lose their advantage.

Winning the Loser’s Game
By Charles D. Ellis (1998)

3. In his classic book “Winning the Loser’s Game,” Charles D. Ellis presents a highly influential investment narrative that, if followed, will lead investors to make wise decisions. Using the metaphor of amateur tennis, he explains that most points are won not by adroit plays on your part but rather by mistakes by your opponent. Success is achieved not by attempting some fancy shot but by hitting the ball back and waiting for your opponent to make a mistake. In investing, it is even harder to outsmart your opponents, who are increasingly professional investors with better information, faster computers and greater resources. Attempting to pick the best stocks, industries or managers will invariably lead to mistakes. To win by not losing, buy and hold a broad-based index fund and avoid the temptation to try to outsmart the market. Even most professionals, paradoxically, would be better off indexing as markets become more efficient. Mr. Ellis, the founder of the consulting firm Greenwich Associates, writes with clarity, humor and verve. Now in its eighth edition (published in 2021), this is an indispensable guide to investment wisdom.

Thinking, Fast and Slow
By Daniel Kahneman (2011)

4. Daniel Kahneman, a psychologist who won the Nobel Prize in economics in 2002, has written a wise and highly accessible book with advice for everyone who makes personal or business decisions. Our emotional and intuitive responses (what Mr. Kahneman calls our “fast thinking”) often lead us to make serious mistakes, especially in the field of investing. People tend to be overconfident and overoptimistic in their predictions. They systematically make biased judgments and too often follow the herd. They suffer from pride and regret and have asymmetric responses to gains and losses. Slow thinking is more deliberative, logical and analytical. It avoids snap judgments and emotional instincts and allocates mental effort to the complexity of decisions. When decisions must be made based on forecasts, it recognizes uncertainty and employs wide probability estimates for future events. This book is an intellectual tour de force but is written in a simple, engaging and entertaining style. It is a masterpiece of insight into the human mind.

The Millionaire Next Door
By Thomas J. Stanley and William D. Danko (1996)

5. Thomas Stanley and William Danko surveyed millionaire households in the U.S. and reached a surprising conclusion: The typical millionaire isn’t living extravagantly with fancy homes and cars, all thanks to an inherited trust fund. Most millionaires are first-generation rich. They often started their own business. Wealth in America is more often the result of a strong work ethic, frugal spending habits, and regular savings and investing. Drawing on case studies of America’s surprisingly numerous middle-class millionaires, Messrs. Stanley and Danko describe role models for young people who weren’t born with a silver spoon. The millionaires next door aren’t interested in social status or conspicuous consumption but value financial independence. They live in understated homes in middle-class neighborhoods. Many buy late-model used cars instead of the fanciest new vehicle. They avoid spending tomorrow’s cash today on high-end clothing or goods involving a never-ending cycle of depreciating assets. Yet they appear to be far happier than their more ostentatious peers. The templates of successful financial lives make for good reading and fruitful following.

Burton Malkiel is an American economist and writer most noted for his classic finance book A Random Walk Down Wall Street.

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