08 June 2014

Gironimo!: Riding the Very Terrible 1914 Tour of Italy by Tim Moore [2014]

This is a travel book describing Tim Moore's attempt to cycle the course of the Giro d'Italia of 1914, using a historically accurate bike. I picked it up because I heard pieces of it on Radio 4's book of the week and I had read some of the author's other books.  

It's an insubstantial book and the slightly arch authorial voice can be grating at times. Also, the technical aspects of assembling the bicycle appeal to a certain character trait which is under-developed with me. The main point that stays with me is the brutality of the 1914 Giro. Moore makes the point that the cyclists taking part were predominantly country boys fleeing poverty (and famine) in pre-industrialized rural Italy. As a result, they were prepared to put up with a level of hardship for relatively little reward that seems astonishing today.
The average stage length was 395 KM.  Because some of the stages took 20 hours to complete, they started at midnight so as to ensure an early evening finish the following day. Only 8 riders finished the race, from 81 who started. Moore covers the course at a significantly slower pace, and the modern travelogue is interspersed with details of the original race. There is a lot of historical cycling information here which did not really grab me. However, I am glad I read it.
As an aside, the author gives an interesting insight into the social stratification of immigrants in Italy by observing the concentric rings of prostitutes that circle Italian cities as he approaches them. These are (in ascending order of price): African, Old Eastern Europeans, Young Eastern Europeans.  An emergent order of sex workers.

25 May 2014

The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters by Gregory Zuckerman [2013]

I picked this up because I heard the author being interviewed on a podcast and I'm interested in US energy independence, which would be globally transformative. 

The book is a history of how independent companies in the US developed and commercialised hydraulic fracturing (fracking) to extract natural gas and oil from rock and in particular shale. The narrative is driven by colourful larger-than-life characters. This is compelling but unsurprising (a quiet and reserved oilman with a passion for the poetry of George Herbert - now that would be truly fascinating...). In fact the mechanics of fracking and the development of the process is interesting enough that I thought that the focus on the founders was not necessary.
Key points that I found interesting:

1    A uniquely American approach to oil exploration and extraction. What's remarkable to this European reader is how little state intervention there appears to be in these new mining techniques. The book makes the point several times that in the USA, citizens own the mining rights associated with their land and have the liberty to do what they want with it, including leasing it to mining companies. At a broader level, I am increasingly drawn to the argument that the absence of excessive governmental regulation is a fundamental driver of economic development. 

2    The importance of real estate acquisition in driving value at publicly-traded fracking firms. Some of the companies profiled in the book (notably Chesapeake Energy) borrow billions in order to acquire hundreds of thousands of square miles of land.  The present value is all about anticipated revenue streams, so it is not necessary to actually work the plots to push up the share price. This almost suggests to me that Chesapeake could do as well as a pure real estate company. As a counter to this, the way that the market has developed is that leasing is on a 'use it or lose it' basis - i.e. the company needs to start drilling within a certain time period or loses the concession.  This leads to a weird data point - Mark Rowland of Chesapeake states in 2010 when gas prices are low and that "at least half and probably two-thirds or three quarters of our gas drilling is what I would call involuntary". 

3    The sensitivity of the industry (particularly the publicly-traded companies) to the market price of energy. It's an obvious point but extracting each unit of gas or oil from a particular field carries a cost (e.g. a cost per barrel in the case of oil). So mining in that area will only be profitable so long as the market price of the energy allows for a profit. What the book makes clear is that the market price changes rapidly, but that tooling up mines to commence extraction takes a lot longer. This is why companies have to landbank. Externally-driven volatility also means that the difference in value of these companies (and therefore their perceived health) will fluctuate wildly without necessarily reflecting the underlying value of the business. I think there is a deeper point here that I have yet to work out.

4    Co-investment by founders.  I had not realized that it used to be market for founders to purchase individual stakes in wells alongside their companies (even after they went public), and to take a personal share of the profits on each. 

The argument in favour of this sort of arrangement is that co-investing by management aligns their interest with the investors. I would counter this as follows: (i) this is only the case if management are obliged to participate in every deal (and is arguably the reverse if they are allowed to cherry-pick deals); and (ii) in the case of Aubrey McClendon of Chesapeake, his investments were funded by an ad hoc $75 million bonus paid by the company, and by private loans provided by Chesapeake's lenders. Which at the least is a conflict of interests and at the most seems a little like the casino giving a gambler his stake and allowing him to keep the winnings. This sort of private co-investment right that I used to see private equity general partners (the fund managers) try to negotiate into their partnership agreements and I always thought it strange; it seems even more so when dealing with public companies with retail investors. 

This is a really interesting book which ends with a brief discussion of the global consequences of an energy-independent USA. The author makes the point that increased use of natural gas derived from fracking has led to a diminishing use of dirty coal in the USA, although I probably need to read something from the environmentalist perspective to get a balancing view on the beneficial impact of fracking. I appreciate that there are many opposing views.

24 May 2014

The Gambler by Fyodor Dostoevsky [1867]

I picked this up because I recently spent a weekend in Baden-Baden, the German spa town which provided (some of) the inspiration for 'Roulettenburg' in this short novel.  The central theme is the contrast between life when gambling on the one hand and everything else. Through its intensity, gambling makes all other aspects of the characters' lives seem trite and monotonous. This creates a sense of existential despair which feels very modern.

The gambling scenes are not enjoyable to read - there is a mania which grips the players which is deeply disconcerting. The pleasures of occasional victory are incredibly transient and limited to within the gaming room. On the occasion that the main character Alexei Ivanovich does manage to leave the casino with a fortune, he does not enjoy spending it. The scenes in Paris when he is extravagantly blowing his winnings with his spendthrift mistress Madam de Cominges are peculiarly joyless and really just an intermission before he can start gambling again. In fact, the more one thinks about the book, the more one realizes is that the draw of gambling is not the winning but the losing, of going to zero. I can't work out whether there is a valid sexual metaphor here or not – it's the sort of image I would have had no compunction about using 20 years ago, but I am now a little more circumspect. 

There is a huge amount in this short book and I really enjoyed it.

One other point: one of the recurrent images in the book is of hordes of Russians swooping into this small German spa town; my experience in 2014 was not entirely dissimilar as there seemed to be big groups of Russians all over town. However, I understand that they gamble less now and are now more interested in getting their money out of Russia and investing in hard German assets.

18 May 2014

The Long Run by Mishka Shubaly [2011]

I read this as a companion piece to Finding Ultra by Rich Roll. 

It's a short (60 page) memoir about the author's transition from alcoholism and drug abuse to ultra running. It was interesting because (a) it was very well-written and (b) it's realistic in that the arc of redemption does not complete - at the end of the book the author has stopped drinking but has not stopped using prescription medication and also admits that he is not necessarily any happier than he was before. 

A thought-provoking book and a great example of the novella-length Kindle single. It also made me want to find out more about Mishka Shubaly, an intriguing and talented guy who comes across as a sort of latter day Henry Rollins.

Flash Boys: A Wall Street Revolt by Michael Lewis [2014]

Like almost everyone else, I think Michael Lewis is a captivating writer and I downloaded this book within a couple of days of its release.  The first thing to say is that it is a little disappointing in that it is not as compelling as The Big Short.  But this could just be the subject matter.

Key points I took away from this book:

1     The domination of high-frequency trading as a proportion of all share activity. The majority of all share purchases are not made by investors buying a long term share of the company's profits, but short term deals to arbitrage price anomalies. I don't have any sort of moral objection to this, as in itself it is not objectionable (the real problem, as Lewis identifies, is the lack of transparency - a rigged system is only really a problem if people think it's fair). What is interesting is how far removed this sort of trading is from the traditional picture of company investment that is painted by fund manager advertisements and Warren Buffet hagiographies. 

2     The overwhelming sense that finance is an insiders' game and that if you can't tell who the fool is, it's you. The idea that a retail investor can get any sort of edge in this environment is ludicrous. Although the book is about Wall Street, what Lewis actually describes does not seem like capitalism at all.

3     This is a technical point but I did wonder whether high frequency trading would actually be possible in the UK, or whether Stamp Duty payable on each deal would crush the returns, which are after all typically based on making millions of small, profitable deals, each of which would be taxed. I have not seen this argument made very strongly in the public discussions on high frequency trading.

An interesting book that will make you wary of buying anything but the cheapest index fund ever again.

The Seed Buried Deep by Jason Lewis [2013]

This is the sequel to Lewis' first book about circumnavigating the world using human power.  

Here are the things which stay with me a month after reading:

1     The audacity of the venture is still incredible.  In the first section of the book, the author continues to rollerblade across the United States with almost no money, sleeping rough most of the time and carrying everything he needs on his back.  This section feels like a tale of a Great Depression era hobo, yet the trip occurred as recently as 1996.  There are setbacks to overcome (to put it mildly) but the overwhelming surprise here is that this was possible at all - it's very liberating to read about and gives one a tremendous sense of what is possible.

2     Lewis crosses the Pacific in his pedal-powered boat Moksha in three legs, one of which is a 73 day solo voyage. What's interesting here is that even in this unimaginable stretch of solitary confinement, Lewis seems to feel less isolated than in the initial trip across the Atlantic when he had a co-pilot.  I think the reason for this is that the technology has advanced sufficiently for him to be in relatively regular contact with home and the school classes who are following him by email (this is the dawn of the internet age).  Lewis appears to view this inability to be truly alone as an obstacle to attaining the spiritual enlightenment he is seeking, which seems a challenging idea in a connected society.

A gripping tale by a modern hero possessed of awe-inspiring stubbornness.

13 May 2014

Finding Ultra by Rich Roll [2011]

This is a memoir by ultra-endurance athlete Rich Roll that I picked up because I had listened to a couple of his podcasts and found them to be compelling.  

The book is really about addiction. The first addiction is alcohol, from which Roll emerges in his early 30s.  Enthusiastic drinking at college leads to increasingly hazardous personal catastrophes in his 20s, which lead to rehabilitation. This is standard for a recovery memoir but it is well written and compelling: this section of the book would work as a standalone piece. An interesting cultural aside here is how much drink driving there is in this section of the book - not just driving when drunk, but actually driving whilst drinking, with a can of beer wedged between your legs. For some reason, this feels like a very American thing to do (like going to a drive-in). The British equivalent is probably furtive drinking on public transport.  

After spending his 30s as an unhappy lawyer, the narrative picks up when Roll gives up meat and embraces a plant-based (vegan) diet on the eve of his 40th birthday. This is a reaction to his own physical decline, which is the result of working 80 hour weeks and inhaling junk food instead of beer to unwind. The diet leads quickly to ultra-athletics and some truly gruelling endurance events. This section seems less well-written than the first half of the book, although there are some memorable descriptions of suffering throughout the Epic 5 event (5 consecutive Ironman Triathlons). 

A couple of points:

1    What comes across very clearly (and also in his podcasts) is that Roll trades one addiction for another. The alcohol, the work, the endurance events all seem to be different outlets for the same compulsive energy - different ways of scratching the same itch. Harnessing that energy for exercise is clearly better than directing it towards getting drunk or eating burgers, but the book left me wondering whether true salvation would lie in getting rid of the itch altogether. There is probably a Zen point somewhere here.

2    I was left asking the question about our ability to change: is lasting behavioural change is actually possible at all without the catalyst of some sort of trauma?  Incremental course correction would clearly be preferable to waiting until one had touched bottom, but this appears to be very difficult. There is the spectre of physical / chemical addiction lurking around some self-destructive patterns of behaviour, these are in the minority and I suspect that there is some deep-rooted psychological reason for this intransigence. I am interested in finding out more about this.