I am currently reading The Snowball: Warren Buffett and the Business of Life by Alice Schroeder. As an authorized biography of Warren Buffett intended for the general public and not a book specifically about investing per se, I think that so far it is excellent. I have only recently started learning more about Buffett, but he is certainly an intriguing person. Schroeder is an excellent writer, and provides both detail and insight into his life as well as does a especially good job of explaining the financial aspects of his activities.

Here are some of the notes that I took while reading the book so far, covering his early years:

• The Snowball title is a metaphor. “Life is like a snowball. The important thing is finding wet snow and a really long hill” How did Buffett’s portfolio grow so big? He started early, and with relentless focus came the power of compounding returns. (He specifically states that credit card debt is a huge obstacle in starting your own snowball!)
• As a teenager, why did Warren want money? A quote from Buffet:
  

  It could make me independent. Then I could do what I wanted to do with my life. And the biggest thing I wanted to do was work for myself. I didn’t want other people directing me. The idea of doing what I wanted to do every day was important to me.

  A amazingly common sentiment among those that end up very rich. Independence, not money, as the primary goal.

• Since he felt socially awkward growing up, he was inspired by Dale Carnegie’s now-famous book How to Win Friends and Influence People. Here are some of the rules that he took upon himself to follow:
  

  Everyone wants attention and admiration. Nobody wants to be criticized.
  The sweetest sound in the English language is the sound of a person’s own name.
  The only way to get the best of an argument is to avoid it.
  If you are wrong, admit it quickly and emphatically.
  Ask questions instead of giving direct orders.
  Give the other person a fine reputation to live up to.
  Call attention to people’s mistakes indirectly. Let the other person save face.

• By the time he was 16 years old, Warren Buffett had saved up $5,000. This was primarily through delivering over 500,000 newspapers, along with other small enterprises. If adjusted for inflation, $5,000 at that time would be the equivalent of $53,000 in 2007. Talk about a head start for that snowball.

John Bogle is the founder of the Vanguard Mutual Fund Group, and the creator of the first index fund. Reading his latest book Enough: True Measures of Money, Business, and Life was like listening to one of his many speaking engagements, a distillation of a lifetime of wisdom from a man who changed the way that billions of dollars are invested today.

As Heller famously responded when told by Kurt Vonnegut that a hedge fund manager had made more money in a single day than his classic novel Catch-22 made in its entire history, “Yes, but I have something he will never have… enough.”

Very simply, this book outlines the problem with making how much money we have the way to measure “success”. Such a philosophy affects how individuals invest, how business is conducted, and how lives are led. Bogle warns that this is taking our country down a dangerous road, which may leave our future less bright than the past. As Albert Einstein said: “Not everything that counts can be counted.”

His words about the need for character, accountability, and stewardship definitely ring true. However, I just can’t see the people of Wall Street turning down all this easy money without some “convincing” from the rest of us. Sure, they may feel a tinge of guilt now and then. But as Bogle paraphrases Upton Sinclair: “It’s amazing how difficult it is for a man to understand something if he’s paid a small fortune not to.”

In my opinion, it all ends up falling on us common folk as a whole to vote with our own dollars by not allowing overpaid CEOs as shareholders and consumers, not investing in high-cost complex investments, and not valuing “stuff” so much. We need to change things from the bottom up, not just with top-down rules and regulations.

Finally, my favorite part of this book is how Bogle acknowledges that his success was largely due to a mixture of luck and the assistance of many other people who believed in him. Too many successful people look back and think they did it all themselves. Sure, they may have worked very hard, but every one of us had help. A loving and supporting parent. A teacher who went the extra mile. A mentor who shared their own experience. Knowing that you didn’t do it alone, makes it easier to stop thinking of only yourself, which helps you find the balance of “enough” that includes thinking of others. At least that’s how I see it.

Recap
This is not a book about what kind of stock to buy. If you want Bogle’s view on that, read the more in-depth Common Sense on Mutual Funds or the concise Little Book of Common Sense Investing. I actually like the short one better.

Nor is this a book about frugality or living below your means. Instead, this tends to be more of a “Big Picture” book, about our definition of what “success” is. What should our goals be? What do we value? If you’re looking for some guidance in this area, or feel like there is something missing to this pursuit of money, then this is the book for you.

There are hundreds of books about how to invest like Warren Buffett. For whatever reason, I haven’t read any of them (yet). For one, if really wanted to invest like him, why not just invest with him and buy a share of Berkshire Hathaway? A Class B share recently traded at around $2,300, more than 50% off its high of $5,000. And if I bought a share, I could attend those annual shareholder meetings in Omaha, Nebraska* that I’ve heard so much about. (I have read some of the shareholder letters.) Buffett himself calls it the “Woodstock of Capitalism”.

What’s a Berkshire Hathaway Annual Meeting Like?
That’s the question behind the book Pilgrimage to Warren Buffett’s Omaha by hedge fund manager Jeff Matthews. He first went to the 2007 annual meeting and wrote about it on his blog. I guess people liked it, and so he went back in 2008 and weaved it all together into this book.

A very distinguishing trait of the annual meeting is that Chairman Warren Buffett and Vice-Chairman Charlie Munger not only want their shareholders to attend, but willingly sit down for a six-hour long Q&A session where you can ask any question, and they will answer it personally. Many of the famous quotes you’ve read elsewhere were first spoken in this format, and the best part of this book is probably reading about their thoughtful responses to all these questions.

Another feature I didn’t know about is that the meeting is also highly profitable for Berkshire. Shareholders are given special tours and discounts to subsidiaries like Nebraska Furniture Mart, Borsheim’s Jewelers, and so on. Estimates say that over $100 million is spent there.

What Else Is Inside The Book
A lot of the book is in informal “blog” format, with Matthews recounting his first-hand experiences down to grabbing lunch or renting a car. However, sprinkled throughout the book are also facts and tidbits about the company and Buffett, most of which I didn’t know very well but are things that I’d expect a die-hard fan to know already. It worked well for me and provided some helpful background.

For example, I learned that the businesses with Berkshire Hathaway tend to operate independently and without much oversight from Warren Buffett or Charlie Munger. And it’s a wide variety of stores – from GEICO insurance to See’s Candies to NetJets to Nebraska Furniture Mart. Berkshire also gets the chance to buy many profitable, well-run, private companies at a discount from the individuals and families that created them. Why? Because they are attached to these businesses, and want them to remain under a certain quality of stewardship.

But it’s not a total slurp-fest. Criticisms are brought up, like how Buffett has called derivatives “financial weapons of mass destruction”, but also bought millions worth anyway. Or when he talked up the values of executives for subsidiary General Re who later got convicted of securities fraud.

Summary
This book is well-written, easy to read, and a perfect companion for a cross-country airplane trip or nightstand. However, I don’t think I really learned much of anything practical from a financial perspective. I’d treat it mostly as entertainment.

To be clear, it is not a book on value investing. For that, stick to the classic The Intelligent Investor by Benjamin Graham. Nor is it a book about the personal life of Warren Buffett. For that, there is now The Snowball.

Actually, the book I most want to read next is Poor Charlie’s Almanack, which contains many quotes from Charlie Munger, who seems a bit abrasive but I have come to respect him as an independent thinker. The only problem is that the book doesn’t seem to be in print anymore and used copies are fifty bucks? Time to hit up the library.

I’m still wavering as to whether I want to attend this meeting. Would it be worth the hotel and airfare? Anyone planning on being in Omaha on May 2, 2009? 🙂

* Actually, you don’t even need to be a shareholder to attend any more. Buffett got annoyed that people were scalping tickets on eBay for $100+, so every year he floods eBay with tickets for only $2.50.

Like scary stories? I usually stay away from the horror movies section, but I was intrigued by the idea behind of Financial Armageddon: Protecting Your Future From Economic Collapse by Michael Panzer. This is a book about why our economic system is in danger, how it will collapse, and the bleak future ahead. Keep in mind that this was initially published in March 2007, even before the peak of the subprime mortgage mess and current economic slowdown. The book is separated into four parts: Threats, Risks, Fallout, and Defenses.

Threats
Here, the author lays out a relatively convincing picture of how fragile our economic system really is right now. This is the best part of the book in my opinion, and what you should read it for.

Debt. Our nation is in huge debt. Many consumers are also in huge debt or living paycheck-to-paycheck. We spend and spend, and don’t save for a rainy day. Guess what? Neither does the government. Does this sound healthy?

The Retirement System. We all know that more people are on their own with plans like 401ks, for better or worse (mostly worse). The problems with Social Security are relatively well-known. After a few big blow-ups like United, we now know that many private pensions are underfunded. And you know what? Many public pensions are underfunded as well. This is what happens when you allow politicians who need to get re-elected every few years to make promises for the next 100 years. If you think municipal governments can’t go bankrupt, check out the City of Vallejo. In other words, the things we depend on in our old age are shaky as well.

Federal Guarantees. We all love the FDIC insurance for our bank accounts, since we can basically keep our money anywhere. But due to fractional-reserve banking, for every $1 in checking accounts a bank can make $10 in loans. In other words, if a real “bank run” occurred, the FDIC reserves would be depleted quickly. Imagine what would happen if FDIC insurance started getting revoked. He also picks on Fannie Mae and Freddie Mac, which are both allowed to do some crazy things because they are “government-sponsored” and therefore people assume the government will bail them out if something goes wrong.

The problem with this is that such government guarantees encourage such financial institutions to take huge gambles. *cough* sub-prime mortgage loans *cough*. Indeed, many banks believe themselves to be “too big to fail” because they are so critical to the system. This is how we ended up with Bear Stearns being sold for $2/share. Indeed, Bear Stearns was too big to fail, so the government tried to make the bailout as painful as possible.

Derivatives are the final threat, and are instruments designed to manage risk. The problem is that corporations believe that because they are “covered” by a myriad of derivatives, they can take on some huge bets. But these “no-risk bets” are all based on complex mathematical models, and we all know models and reality are not necessarily the same. You could safely bet that the Cubs won’t win the World Series for last 99 years, but you never know…

Risks and Fallout
Inevitably, all of the these threats are weaved into a saga in which we fall into Financial Armageddon. Economic recession and then depression. Companies faltering. Stock prices plummeting. Bonds defaulting. Real estate prices dropping further. Banks and insurance companies failing. Government guarantees being removed. Skyrocketing unemployment. Entitlement programs are cut due to the lower tax revenues. Rising crime and gang activity. The government tries to print more money, leading to hyperinflation, with the prices of food and other commodities doubling every few months.

Planning
This is the most disappointing part of the book, especially since it offers to “protect our future” on the cover. So what do we do to prepare for Armageddon?! Stop spending so much and save more money for a rainy day. Okay… What about all these dropping stock and bond values? Unfortunately, there is just some vague advice about having to be “smart” and “quick” to make money from the volatility. For the rest of us, we should simply sell everything and buy physical gold because our paper money will be inflated until it is worthless. The old “buy and hold stocks” idea is useless now. We should also buy all the physical goods we can with our cash before hyperinflation hits. Perhaps this really is the best plan, but I was hoping for something more substantial than what I call the standard “buy gold and stock up on Spam ‘n toilet paper” strategy.

Summary
Panzer points out that not one recession in the past 50 years has been predicted in advance by a majority of top economists. While this is supposed to scare you, all it did was remind me that predicting the future reliable is pretty much impossible. I enjoyed reading the first half of this book, because I do think that such a scenario can happen at least to some degree, and the books does a good job of pointing out many of the weaknesses in our financial system. Moreover, it is simply a good “doom and gloom” story that is entertaining to read. Indeed, some of it has already happened! However, I did not find much insightful information in this book on how to actually protect myself from such a collapse.

The overall moral of this book review is that even though a book finds a publisher, it doesn’t mean the advice is accurate or applicable to you. The book Millionaire by Thirty: The Quickest Path to Early Financial Independence by Doug Andrews & Company appears to be very similar to the other Missed Fortune books by the same author. In fact, from reading the reviews all of these books seem to contain the exact same material.

The book starts out innocently enough, talking about familiar concepts like focusing on your strengths, paying yourself first, spending less than you earns, and it even provides an explanation of the “envelope” system of budgeting. However, it then quickly shifts into the two main points of the book, both of which I have issues with. Too bad, I only have a few months until I’m 30 and I could use another $742,000…

Housing Prices Always Go Up, Take Out Largest Mortgage Possible!
“Do you rent? Rent is like throwing money down a black hole. It doesn’t matter how much money you have saved or how long you plan on staying in the same place, you should always try to buy a home. If you aren’t going to stay very long you can simply get an adjustable-rate loan with no down payment. Housing prices always go up, so you can enjoy the low interest for a couple of years, and then sell and make a nice profit.

If you are really smart and disciplined, you can even get an interest-only or negative-amortization loan because then you won’t build up any equity at all. Accumulating home equity is bad. Anytime you have any, you should take out a loan on it and invest it somewhere else, like a second home.”

The above are all the dangerous generalizations about real estate contained in this book. Newsflash… Renting can be the best option for many people. Housing prices do not always go up. Thousands of people who bought a home and now have to sell after a few years will have lost tens of thousands of dollars compared to if they had rented.

Don’t Invest In 401ks and Roth IRAs, Buy Universal Life Insurance Instead
Throughout the book, tax-deferred plans like 401(k)s and IRAs are dismissed, saying that you should not contribute to them unless you have at least a 50% match, and maybe not even then. Why? 401(k)s and Traditional IRAs are taxed upon withdrawal, and the Roth versions use contributions that are already taxed. In other words, both types will be taxed at least once. Also, there can be penalties for early withdrawal, even though there are ways around these.

Instead, the book repeatedly hints at a mysterious alternative investment that is completely tax-free: at contribution, during accumulation, and at distribution. This investment turns out to be equity-indexed, universal life insurance.

How are contributions tax-free? It turns out that they want you to take either a larger mortgage or home equity loan, and using that to fund the life insurance plan. Because mortgage interest is often tax-deductible, he counts this as a “tax-free” contribution. Huh?? I could put the same borrowed money into a Roth IRA or anything, and call it a tax-free contribution.

However, it appears to be true that after a few years due to an apparent loophole in the tax law, you can take out “loans” from a universal life insurance policy tax-free. This simply reduces your death benefit when you die, unless you repay the loans. There are withdrawal limits, but can we use this to our advantage?

Equity-Indexed Life Insurance, Risk and Performance Concerns
The pitch is always the same for equity-indexed insurance. You can never “lose” money like it can in a stock market, but if the market goes up your investments will go up with it. There is usually both a cap rate and a guaranteed rate. For example you might get a 15% cap and 1% guaranteed. If the index goes up 30% you get 15%, but if it goes down 30% then you still get 1%. Not bad at first glance.

Catch #1: You Miss Out On Dividends When you invest in an index fund like an S&P 500 index fund, you get both the return of the index (capital gains) and also the dividends that are paid out. The average historical dividend yield over the last century has been ~4.5%. Currently, it is about 2%. Since the index does not include dividends, you are automatically losing that portion of total return. If the total annual return on the mutual fund was 8% and there were no additional costs, then the indexed-return on the insurance balance would only be 6%.

Catch #2: You Don’t Get All The Capital Gains Either
Consider this – If the insurance companies are indexed to the same thing we can buy and they offer us downside protection, this will always come at a price. There is simply no way the annual expenses of such a high-commission, salesperson-promoted product like this can be as low as that of a similar index fund. Details on how each universal life insurance policy tries to “participate” according to stock index vary widely, so I can’t run the exact numbers based on historical returns.

However, you can get an idea of the lost performance from this Scott Burns article regarding an earlier book by Mr. Andrews:

Using a 30-year history of the S&P 500 index ending in 2005 and a common formula for crediting returns, he says that a policy crediting 1 percent in loss years and 100 percent of gains up to 17 percent in good years would have provided an average crediting rate of 9.62 percent. […] Even after subtracting the cost of insurance and other policy expenses, such as the commissions that would enrich all of his disciples, he estimates that your net return would be 8.5 percent…

8.5% sounds nice. Now what was the total return of the S&P 500 from 1976-2006? 12.7 percent annually. If you had $100,000 in a tax-deferred account like a 401(k) invested at 12.7% annually for 30 years, you would have $3,611,748 vs. the $1,155,825 tax-free from the insurance. Even you paid 40% in taxes upon withdrawal, you’d still be over $1,000,000 ahead with a regular 401(k).

Simply put, you give up a lot of potential return. Just because something is “linked” to the stock market, doesn’t mean it will return anywhere near the same amount. If you are truly saving for retirement and are relatively young, then you have a long-term time horizon and do not need such risk-reducing products that include a guaranteed rate.

In all 62 of the 20-year investing periods from 1926 to 2006, an investment in large stocks produced a positive return. The worst return was 3.1 percent annually for the 20-year period beginning in 1929 and ending in 1948. In other words, even investing on the eve of the Great Depression produced a higher long-term return than the guaranteed minimum return of equity-index products.

Arbitrage Gone Bad
Finally, recall that a significant part of this insurance is supposed to be funded by a home equity loan, where you can earn more interest from this investment than you are paying in mortgage interest. Arbitrage! Okay, but if the market only returns 8% including dividends which is 6% without dividends, and you then factor in the expenses of this insurance layer, you are maybe looking at a 5% return max. If you are paying 6% in mortgage interest and earning 5%, you’re now losing money.

Now, there may be a small slice of the population that may be best served by this product. But it’s definitely low on my list, and definitely not until you have maxed out tax-advantaged accounts like 401ks and IRAs. Even after that, I would first investigate either tax-managed mutual funds or a low-cost variable annuity from Vanguard.

Summary
Many of the books I read may not be brilliant, but they contain generally good ideas and target a specific type of reader. However, this book is one that could actually hurt more people than it helps. This book is just plain misleading. It would be wonderful if home prices always went up and there was an investment where I could never pay taxes, have no downside risk, and get stock-like returns, but unfortunately both are too good to be true. I’ve tried to lay out my arguments for this briefly, but if you want a better description read the detailed reviews here and here. Clever Dude also shared his thoughts here.

Short version: Don’t read it, don’t buy it, don’t even borrow it from the library.

Initially, I had intended this to be review of Suze Orman’s newest book Women & Money: Owning the Power to Control Your Destiny to be done by my wife. However, she expresses no interest in doing so. So I read it myself, and found out that her reaction was actually a bit ironic. Here is my review of this book both from the perspective of a male and the husband of a smart, capable woman who doesn’t like dealing with money.

The first half of this book deals primarily with the question of Women can handle money as well as any man… So why don’t they? It’s tough to deal with this subject obviously, because not all women are the same and you don’t want to be accused of stereotyping. But at the same time I’m glad that Suze tried. Here are a few ideas.

Women feel like coveting money is wrong. For some reason, it is okay to be proud to have a good job and a good family, but it’s wrong to openly admit you want lots of money. It could be that women tend to be more nurturing and taking care of others versus themselves. They don’t want to be considered selfish.

But at the same time that they try not to focus on money, they still worry about being broke. The book quotes a study that showed 90% of women describing themselves as feeling insecure when it came to their finances. In the same survey, nearly half the respondents said that the prospect of ending up a bag lady has crossed their minds.

Women are more team-oriented, as opposed to individually oriented. When a man thinks about money, they are at war – it’s a competitive battle. Me, me, me. When a woman thinks about money, she wants to make sure the whole team is treated fairly, and wants everyone to get along without hurting anyone else’s feelings.

An example of this is during salary negotiations. The book states that research has shown that women are 2.5 times more likely to say they feel “a great deal of apprehension” about negotiating. In one study, men used the metaphor of “winning a ballgame” to describe negotiating, while women picked the metaphor of “going to the dentist.”

I have personally experienced this with my wife. Although her performance reviews are always great, she has always been very passive when it comes to salary negotiations. Despite my suggestions, she has never asked for an higher raise than offered, and never put in a counter-offer when accepting a new job. Suze puts it this way – “You are not on sale. Do not undervalue yourself.”

Save Yourself Plan
The second half of the book is a condensed version of all her personal finance tips, broken down into 5 steps. The idea is that a woman should finish one manageable step per month. The advice is solid and straightforward, if a bit one-size-fits-all. Here’s a brief summary of each step:

1. Checking and savings accounts. Get organized, get a free checking account, open up a higher-yield savings account, etc.
2. Credit cards and FICO scores. Check your credit score, build up your credit if you don’t have any, pay down bills, pay less fees, etc.
3. Retirement Investing. Start putting something away, invest in 401ks and Roth IRAs, buy low-cost index funds, etc.
4. Must-Have Documents. Wills, living revocable trusts, advanced directives, etc.
5. Protecting Your Family and Home. Life insurance, renters or homeowner’s insurance, personal liability insurance, etc.

Overall Review
I would read Women and Money if you (or someone important you know) feels like they should learn more about money, but for whatever reason haven’t been able to do so. This books tries to find the right buttons to push, and if it works then it will be worth it. It’s pretty popular so I’m sure most libraries have a copy. The advice included afterwards is good enough as starter material, but is not a source for advanced financial tips.

As for me, this book has caused me to want to involve my wife more in the day-to-day activities, if only to get her more familiar with things. I will continue to encourage my wife to read this book, and will probably include it in my Financial Will. Any thoughts from the women who’ve read this book?

I’ve been getting back into reading financial books, but am really behind in writing reviews for them. One book I finished last month was Wise Investing Made Simple by Larry Swedroe, which promises “Tales to Enrich Your Future”.

The key word is “tales”, because this is not a book with complex mathematical formulas or lots of charts and statistics. (Although I love charts…) It contains 27 short stories using simple concepts like sports analogies to explain the benefits of a long-term, passive approach to investing. Each story includes a quick “Moral of the Tale” summary.

I’ve already written about my favorite tale in Why Sports Betting and Stock Picking Are Similar. But here is my paraphrasing of another good chapter:

The $20 Bill
Here’s is a common story used to poke fun at the Efficient Market Hypothesis. An economist who believes in efficient markets walks down the street with a friend. The friend says “Look, there’s a $20 bill on the ground!” The economist says “No way. If there was a $20 bill on the ground somebody would have already picked it up”, and continues to walk away. This supposedly counters the idea that in a truly efficient market it would be impossible to find an under-priced stock (similar to a $20 bill priced at $10 or even free).

However, this argument is not really correct. What the story eventually explains is that while many passive investors believe that the occasional $20 bill on the ground may exist, spending your time looking for them may not be the most effective way to make money. The same could be said about stock-picking or market timing. Persistence in beating the market (finding $20 bills) beyond the randomly expected is very difficult to find.

Summary
For the investor that is already committed to passive investing and fully understands the underlying reasons why they believe that is the best strategy for them, this book probably won’t bring that much new to the table. It won’t help you decide whether to hold 20% International or 45% International stocks, or if you should include exposure to commodities or precious metals. If you are a full-time trader who is adamantly against passive investing, this book probably won’t contain enough hard facts to sway you either.

Instead, I think the sweet spot for this book are those investors that have been told “index funds are great” and may even invest in them but don’t really know why they are so great and don’t have the interest level to read some dry investing book about correlations and standard deviations. The problem with this level of understanding is that when things get tough it can be easy to bail out if you don’t really know why you’re doing something. This book breaks things down into simple, bite-size pieces without being patronizing.

On a personal level, this book might not be the very first book on saving money I’d give someone, or my favorite book about investing, but I am going to keep it in my library because it provided some different ways to explain to others (and myself at times) why I invest the way I do.

Overall Rating: (ratings explained)

I’ve been chipping away at it for months, and finally finished Thomas Friedman’s The World Is Flat: A Brief History of the Twenty-first Century. By a flat world, he means that the playing field is being leveled and the gap between emerging and developed countries is closing faster and faster. For many people this means the fear of losing jobs to outsourcing, but it’s actually a lot more than that.

Flat means less friction. Yes, less friction for jobs to go back and forth across the world (usually away from the US). But the same holds true for people, money, ideas, and even cultures. He says this is caused by the “triple convergence — of new players, on a new playing field, developing new processes and habits for horizontal collaboration.” We can either look at this loss of friction as a bad thing and try to ignore it or keep it from happening, or we can realize that it is inevitable and work to take best advantage of it.

Up to now, many of the best jobs were here, and you had to live here to perform them. But thanks to new technology like the internet and computers, as long as someone is able to learn the same skills, they can do it from anywhere. This varies from the familiar cheap manufacturing of goods and telephone support, to highly skilled jobs like corporate accounting, computer chip design, even medical procedures.

Up to now, the best education was here. To me, this is critical, and I don’t think people realize it enough. Historically, we have had the most advanced and desirable graduate schools in the world. While in grad school, just in my building alone, I was surrounded by the top students from Germany, India, China, Taiwan, Brazil, and Russia. I’ve heard their stories about having to be the top 0.01% in their country just to get here. The vast majority of these people ended up getting jobs and settling down in the US. If you look around, first-generation immigrants anchor many of the research arms of all our major corporations. Microsoft, GE, Genentech, Google…

In other words, this country has been skimming off much of the smartest and most driven people in the world for ourselves. That’s a pretty sweet deal. But as I type many countries are working feverishly to make their own educational systems better.

If another country has a similar or better educational system, and their workers can do it for less, you can bet the job will be moving there. Patriotism, protectionism, or whatever – it’s still fgoing to happen. This means that we need to work to improve our own education systems and get rid of any sense of entitlement. Soon, simply being lucky enough to have been born in the US won’t be enough.

The book touches on many more topics than this, and I don’t even claim to understand all of it. I’m not an economist nor am I much of a historian. Although Friedman overall is a great storyteller and good at explaining complex ideas, there are also several slow and repetitive parts that literally made me fall asleep while reading it.

Conclusion
In the end, The World Is Flat reminds us that we are all in constant competition with each other. Before, it was your neighbors across the street. Now, it’s anyone with internet access. While it is not a zero-sum game (there is not a fixed number of jobs), there will be people who do better than others. As Americans, we are being chased. Our choices are either to run faster or risk getting left in the dust. Just making us consider such a possibility is a good result from this book.

How you think this competition will unfold can also alter your investment strategy. I still haven’t made any conclusions regarding this, but have been considering simply weighting my investments in proportion to the value of the world’s companies (i.e. using a world market cap-weighted index).

Overall Rating: (ratings explained)