Every generation, a writer and their books pop up that show the back end of Wall Street and its ilk running back to Bagehot’s “Lombard Street”. There was then Livermore’s Reminiscences of a Stock Operator, and Schwed’s “Where Are the Customers' Yachts?” The generation before me had Michael Lewis and his “Liar’s Poker.” You may say that he is contemporary, since he is still writing, but that book made his name, and he hasn’t worked on the street since. He’s more of an outsider now – in fact, “Liar’s Poker” just got a rerelease for its 25th anniversary. Our generation lacks our defining book. The writers who might have written those books are still grappling with the legacy of the 2008 financial crisis.
But I digress. Then if Lewis was for our fathers, the Adam Smith was for our grandfathers. It is an interesting read in the more things change, the more they stay the same sort of way. Some of the references are dated, but others are remarkably contemporary. One example is traders talking about the income potential of shale gas out west to produce once technology comes on line. There is a joke that they have always been waiting for technology to extract the oil, at least since the thirties. You know what the new technology was that was so promising 50 years ago? Drillers were going to plant small nuclear devices down wells to make them produce. It makes the current fracking debate seem quaint – oh, what’s a little flammable hydrocarbon in your water matter? It could have been much worse. That’s just a tiny part of the book. There’s also some good advice built in. For example, I flagged “If you know the stock doesn’t know you own it, then your ahead of the game” (72), which is evergreen advice against getting stuck in the sunk cost fallacy. There’s also worries that computers will take over and the value of the dollar will go down – which also seems familiar. Overall, this book is well worth a read for someone who is interested in the history of the market or even someone looking for advice in today’s market.