CEO of Large German Publisher speaks out: Why we fear Google

This if one of the most interesting open letter I have ever read by a CEO. Mathias Döpfner, CEO of Axel Springer, closes his open letter:

Dear Eric Schmidt, you do not need my advice, and of course I am writing here from the perspective of those concerned. As a profiteer from Google’s traffic. As a profiteer from Google’s automated marketing of advertising. And as a potential victim of Google’s data and market power. Nevertheless – less is sometimes more. And you can also win yourself to death.
Historically, monopolies have never survived in the long term. Either they have failed as a result of their complacency, which breeds its own success, or they have been weakened by competition – both unlikely scenarios in Google’s case. Or they have been restricted by political initiatives. IBM and Microsoft are the most recent examples.

Read full letter in FAZ: Why we fear Google

Superb Video Illustration of Changes to USA Budget in the past 50 Years

American Budget

Click on “More” to play the video animation.

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Global Health and Wealth over the past 200 years

Benefits of the Knwoledge Economy

Figure 1 from the ETH Strategy Report: Knowledge is the main engine of economic growth. A strong correlation can be observed between the Knowledge Economy Index (KEI) and GDP per capita. The KEI is calculated by the World Bank and is based on the four pillars of the Knowledge Economy framework: 1. An economic and institutional regime to provide incentives for the efficient use of existing and new knowledge and the flourishing of entrepreneurship; 2. An
educated and skilled population to create, share, and use knowledge well. Click on More to see a powerful picture.

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Three Books on the Origins of the Financial Crisis and its Lessons

John Lanchester reviews three books on the origins of the financial crisis and its lessons in the New Yorker.  Two of them are useful for the general reader.

Gillian Tett, “Fool’s Gold” (Free Press)

Richard A. Posner, “A Failure of Capitalism” (Harvard)

I personally personally found Fools Gold the most rewarding of all the books and a higly recommend it to anyone who works in the finance industy or simply wants to understand what caused the recent financial crisis.

Read full review here.

Short History of Modern Finance

In it’s appraisal about the current state of capitalism (Capitalism at Bay) the Economists gives a useful summary of want went wrong.
Without doubt, modern finance has been found seriously wanting. Some banks seemed to assume that markets would be constantly liquid. Risky behaviour garnered huge rewards; caution was punished. Even the best bankers took crazy risks. For instance, by the end of last year Goldman Sachs, by no means the most daring, had $1 trillion of assets teetering atop $43 billion of equity. Lack of regulation encouraged this gambling (see article). Financial innovation in derivatives soared ahead of the rule-setters. Somehow the world ended up with $62 trillion-worth of credit-default swaps (CDSs), none of them traded on exchanges. Not even the most liberal libertarian could imagine that was sensible.

Read the Short History of Modern Finance courtesy of Economist.com

Risk will always equal potential reward

Greed, as it periodically does when traders and bankers forget the lessons of the past, clouded judgments. Some very smart people talked themselves into believing in the repeal of one of the fundamental laws of economics: risk will always equal potential reward. The idea that risk can be eliminated and high yields guaranteed is as idiotic as the idea that gravity can be suspended. Remember Long-Term Capital Management? Ten years ago it figured out how to eliminate risk using highly sophisticated computer programs and rolled up annual returns averaging 40 percent — until it collapsed in a heap.

Read more by John Steele Gordon on the Financial Mess: Greed, Stupidity, Delusion — and Some More Greed here.

The Latest Reasoning about our Irrational Ways

Elizabeth Kolbert reviews in the New Yorker the latest on findings on how people behave in irrational ways when making economic decisions.  Read her Reviews of two new books.
“Predictably Irrational: The Hidden Forces That Shape Our Decisions” (Harper; $25.95); by Ariely, Dan;
“Nudge: Improving Decisions About Health, Wealth, and Happiness” (Yale; $25); by Thaler, Richard H.

Commanding Heights: The Battle for the World Economy

Rarely have I seen such a powerful documentary about how ideas shape the world. The film traces the ideas that shaped macro-economic policy making over the course of the 20th century. The film will be eye-opening for people who know very little how economic policy powerfully effects the welfare of societies all over the world. Even if you are a scholar familiar with the history of the 20 century, you will enjoy this fantastic piece of work. One word of clarification. Sophisticated scholars who believe in “free” markets believe in a need for laws. (The film originally aired on PBS and is now available on DVD.)

Bookshelf
China
Entrepreneurship
Innovation
Economics
Management
Psychology