Best of 2008

I know I am suppose to write this post before the year end, but with travel and children I ran out of time.

So, in no particular order here is what has happened and what rises above the rest when I think of 2008:

  • E started kindergarten and Z started preschool.
  • I posted my favorite business books of 2008 over on the 800-CEO-READ blog and worked with us on their selections.
  • Jack and I turned in the manuscript for The 100 Best Business Books of All Time in April. And we just got finished books today and they look great. The book hits shelves February 5th.
  • My 91 bookmarks remind of these yummy sites:
    • Spoonflower for custom fabrics based on your designs
    • Sticker Robot for custom stickers
    • Moo for business cards, holiday cards, and sticker books from your Flickr photos
  • We survived the snowiest winter on record in Waukesha. I think it was 109″.
  • That turned into a flooded basement after warm weather and some huge rains.
  • Mac Apps you should be using: NetNewsWire for RSS feeds, Ecto for blogging, VoodooPad for note taking, and possibly WriteRoom for a clutter-free writing space.
  • Mac Apps to consider: Things (I use to manage to-dos in BaseCamp, but I think I like this desktop/iPhone combo better) and TweetDeck (allows filtering, grouping, and searching all in one Tweeter app)
  • I posted 305 tweets this year. I would have never guessed that and TweetStats tells me I have been accelerating my use of Twitter.
  • Music that worked for me:
  • This American Life provided the best description of the credit crisis I heard, read or watched anywhere. Listen to The Giant Pool of Money. It is worth all 58 minutes. In second place is Michael Lewis’ Panic, an anthology of articles, reports, and missives on the bubbles we have gone through since 1989.

Time To Pay Attention

I just got done reading When Genius Failed, as one of the selections for the 800-CEO-READ upcoming best of business books project. In the book, writer Roger Lowenstein profiles Long-Term Capital Management. In 1998, it was the largest hedge fund and nearly brought down several Wall Street firms when the trades it made went the wrong way. The bailout required the intervention of the Federal Reserve as they herded fourteen banks to pledge $3.65 billion.

Ten years later, we are seeing the same illiquid markets that crippled LTCM. For them it was interest rate swaps; this time it is mortgage-based securities, but on a scale that is two orders of magnitude larger.

I have long argued that Enron and Long-Term Capital were not crises well-understood by the general public. In part because the drama lay in the personal stories of the affected. And there were certainly victims in the employees that worked at these firms, but the biggest causalities were in the balance sheets of large firms who are in the business of lending money. Risk is a part of that game.

We don’t pay much attention to things we don’t understand and the average American doesn’t have a lot of experience with such large-scale financial terms as debits and credits, derivatives or bond spreads. If we are nation fixated on markets and always talking business, we as a whole don’t understand balance sheets or Black-Scholes modeling. This lack of knowledge exacerbates the problem. And it is a problem.

The media reports the stories. The trouble is their viewership has a hard time assessing the magnitude of the story in the 24-hour news cycle. Cable channels report with the same passion the fall of Eliot Spitzer, the disappearance of a young mother, and the Federal Reserve loaning $200 billion to banks.

The final news item in that list is one to concentrate on. This meltdown is mostly being caused by fear and trading will loosen again.

Pay attention though to what our leaders in business and government are doing to deal with the crisis. The Treasury offering new lending guidelines. The Fed offering more and more lenient terms to its customers. Banks lending to other banks. There are broad implications to all of these. Lowenstein uses a Mark Twain quote to that fits with these unfolding events–““History rhymes; it does not repeat.”