Book Review! Business Adventures, by John Brooks.
30 Aug 2015The first of what will hopefully be many reviews of books that I find intriguing and/or entertaining. This article will cover a brief summary of the first chapter of the book, and any thoughts/opinions I may have along with relevant links.
Business Adventures is quite an old book, having been published in 1969. Regardless, I still found several facts surprisingly relevant to modern businesses and believe that the information and knowledge collected can be used even in the 21st century.
The author, John Brooks (1920–1993) was a writer and longtime contributor to The New Yorker magazine, where he worked for many years as a staff writer, specializing in financial topics. Brooks was also the author of several books, both fiction and non-fiction, the best known of which was an examination of the financial shenanigans of the 1960s Wall Street bull market.[1]
Bill Gates has claimed it is “The best business book I’ve ever read”. It was first given to him by Warren Buffet back in 1991.[2] Bill Gates has reviewed the book and it can be found here. He even provides a free download to one of the chapters.
Chapter 1: The Fluctuation.
This chapter covered the flash crash of 1962 in particular, the May 28th/29th crash. The chapter opens with a brief history of the stock exchange and then goes on to give information on the drop in the Dow Jones and the volumes of trades which occurred and compare them briefly to the 1929 crash for the week of May 21st to May 25th. After a brief explanation of how news of trades was communicated back in the day (a truly interesting method and prone to making easy mistakes during high volume times), the writer goes into detail about the delays occurring on the stock exchange ticker and the panic that was slowly taking over investors. After going on to mention the potential effect(s) of mutual funds and margin calls on the stock market, Brooks continues the story as the stock market goes into tuesday. Europe which was effectively behind New York by 24 hours had experienced the shockwaves of yesterday, with several stock markets making massive losses. The big question at the time was would the avalanche of market drops continue. However, as it transpired during the first few hours of trading, the market did not stop its free fall, with practically no purchasers of certain stock and plenty of sellers.
But by a little past mid day, the market was on the upswing. Due to the large delay on the stock exchange ticker, share prices were 1 hour behind, giving the impression that prices were still low whereas the reality was that a buying panic was slowly beginning to take place. After an analysis on the reason the stock market was turning and an enthralling mention about American Telephone & Telegraph (now known as AT&T) and it being one of the key reasons the stock market turned.
Brooks finally ended the story with a mention about the inefficiency of the stock exchange in that era, with orders getting lost, delays between recieving the customers buy/sell order and being able to execute it. Nowadays it is hoped that such things can be avoided with the use of the internet and modern day technology.
Despite this flash crash being over 50 years ago, the psychology of the modern day investor appears to have remained the same.
For another interesting take on the crisis, and how it related to the flash crash of 2010, please read this WSJ article WSJ article. In addition, there are some news paper articles (also WSJ) from 1962, providing a detailed account of what was ocurring at the time.
- Abreast of the Market
- The Market Plunge
- Heller Says Economic Prospects Provide No Basis for Sharp Stock Market Drop
- SEC Probes Market to See if the ‘Pros’ Helped Trigger Drop
This is the first part in a series that will summarize and review the book Business Adventures by John Brooks.