Ten Book Recommendations for Students of Financial History

Gift Ideas to Improve Investment Decision Making

Dec 04, 2023

Photo Credit: Photo provided courtesy of Nick J. Webb; photo has been cropped. Creative commons license is accessible at https://commons.wikimedia.org/wiki/File:Charlie_Munger_2.jpg

On November 28, 2023, Charlie Munger passed away at the age of 99. In comparison to his business partner Warren Buffett, Charlie kept a low public profile, but his investment acumen was equally impressive. When asked how he acquired his skills, Munger would often attribute it to non-stop reading, especially on the topic of financial history. He recognized that investing was largely a game of repetition, but the repetitions were only visible to those who studied the past.

After conducting nearly four years of research for my forthcoming book, Investing in U.S. Financial History, I developed a deep appreciation for Charlie Munger’s wisdom. The benefits were not just theoretical — studying financial history also provided practical value. For example, the financial impact of COVID-19 was considerably less surprising after having studied the financial effects of the outbreak of World War I (1914), the aftermath of the Great Influenza (1919), and the legacy of the Great Inflation (1965-1982).

Investing in U.S. Financial History will be available on February 27, 2024, and the objective is to share the most important financial events in U.S. history and use them as case studies to teach key financial, economic, and investment concepts. The book won’t be available for a few months, but in the meantime, I thought it might be helpful to highlight ten books (in no particular order) that I found to be particularly insightful over the past few years. I have assigned ratings according to (a) relevance to current events, (b) overall educational value, and (c) readability. I also flagged a few that are quite humorous for those craving a lighter tone over the holidays (note that jester hats rather than stars are used in the humor column). I cannot promise that these books will yield multi-billion-dollar ideas, but I do think they will make you better stewards of your money — and the money of others. If you are still in the market for holiday gifts, you may want to keep these in mind.

Quick Takes on Book Recommendations

A Short History of Financial Euphoria — John Kenneth Galbraith was a brilliant historian and exceptional writer. This book explains several famous asset bubbles and crashes, such as the Dutch tulip mania, John Law’s Mississippi Bubble, and the Great Crash of 1929. This book is short and entertaining, yet it also imparts meaningful wisdom. It is a great starting point for people beginning their journey into the past.
Alexander Hamilton — In 1790, the finances of the United States were in shambles. If not for the financial ingenuity of Alexander Hamilton, the nation may have failed. Chernow’s book—which is the basis for Lin-Manuel Miranda’s award-winning Broadway musical—provides an exceptionally detailed recollection of Hamilton’s life, and it pays proper tribute to his invaluable contributions to the success of the United States.
Hetty Green: The Witch of Wall Street — The only flaw of this book is the subtitle. It should have been subtitled “The Queen of Wall Street.” Green was only portrayed as a villain because her peers misinterpreted her thrift as greed and envied her ability to outsmart men without the benefit of their advantages. Nevertheless, this book does a decent job of explaining several of Hetty Green’s virtues. For those who want to read an abbreviated version of Hetty Green’s life, I also recommend reading the article, entitled “Hetty Green: America’s First Value Investor and Financial Grandmaster” in the Museum of American’ Finance’s Financial History magazine.
The Great Inflation and Its Aftermath: The Past and Future of American Affluence — The Federal Reserve’s fortitude in its battle with post-COVID-19 inflation caught many investors off guard. But if one had read Samuelson’s book, they would not have been surprised. The Great Inflation of 1965-1982 was one of the Fed’s biggest mistakes in its 108-year history, and it is one that they are unlikely to repeat. For investors who still question the Fed’s resolve, this is a must read.
The Great Society: A New History — Fiscal spending is unsustainable in the United States, and it has been for many decades. This book traces the inflection point regarding American perceptions on the use of public debt back to the Great Society in the mid-1960s. It is important to understand this fundamental shift in perspective, as there are few Americans living today who remember what it was like when the United States balanced its budget.
The Rise and Fall of American Growth — Americans often assume that technological advancements in the information age will produce productivity gains that exceed those produced during earlier eras. One reason for this misperception is that Americans tend to discount the transformative power of technologies that are now part of everyday life. Examples include air conditioning, home appliances, and automobiles. This makes it difficult to appreciate how dramatic life changed after these seemingly boring technologies were invented. For those who cling to the hope that economic growth from technology-driven productivity gains will rid the United States of its debt problem, this book provides an important reality check.
Trillions: How a Band of Renegades Invented the Index Fund — The index fund is arguably the greatest financial invention of the last 100 years, yet it is still underused by individual and institutional investors. This book recounts the history of the index fund, which emerged in the early 1970s. Understanding the benefits of index fund investing should be required reading for investment professionals, and this book provides an excellent starting point.
Where are the Customers’ Yachts? — This book tilts more toward humor than practical value, but it makes a great gift. The book reveals the danger of trusting investment professionals — especially those who lack a fiduciary obligation to serve their clients’ best interest. The stories seem a bit exaggerated, but it is a great read, nonetheless. It was the only book on this list to earn three jester hats for humor.
Poor Charlie’s Almanack — This book consolidates many of Charlie Munger’s speeches. Although it is not technically a history book, it was worth including given Munger’s recent passing. The book can be a bit difficult to read at times because it consists of a series of speeches, but there are pearls of wisdom scattered throughout. It is worth buying this book if only to read his famous commencement speech at Harvard University. Rather than telling the graduates how to be successful, he advised them on what they should do to live a miserable life. By avoiding these behaviors, he asserted that the graduates were more likely to succeed. It was classic Munger.
On the Brink: Inside the Race to Stop the Collapse of the Financial System — I read multiple books on the Global Financial Crisis (GFC), and I believe that Hank Paulson’s was the best. The GFC of 2007-2009 was an important event in U.S. financial history. This book explains how it happened in a way that is understandable to people who do not have an extensive financial background.

In closing, I wish everybody a happy holiday season! Hopefully, the insights in these books will arm you with deeper knowledge to navigate the future.

Disclaimer: This is a personal newsletter. Any views or opinions expressed herein belong solely to the author and do not represent those of any people or organizations that the writer may or may not be associated with in a professional capacity, unless specifically stated. This is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, service, or considered to be tax advice. There are no guarantees investment strategies will be successful. Past performance is no guarantee of future results. Investing involves risks, including possible loss of principal.