An interesting article in the NYTimes on reading habits of CEOs:

Serious leaders who are serious readers build personal libraries dedicated to how to think, not how to compete.

Perhaps that is why — more than their sex lives or bank accounts — chief executives keep their libraries private.

I’m in the midst of choosing some new bookcases. My book collection is starting to get out of hand. A good problem to have methinks.

Thanks to Brad for the link, and for a number of great book recommendations from his blog.

If the tone of this book seems steeped in the culture of Darwinism and evolutionary thinking, it does not come from any remotely formal training in the natural sciences, but from the evolutionary way of thinking taught by my Monte Carlo simulators.

Nassim Taleb revised his book on the way humans deal with randomness; how we rationalize luck. It is worth a read. (Recommended by the likes of Tom Peters, and Peter Bernstein).

The part that grabbed my attention was Nassim’s use of Monte Carlo simulations, to test out scenarios. The simulator allows exploration of alternate paths, both past and future. Evolution is a search technique to find successful survival strategies for a particular scenario. In biology, we have only one scenario to investigate: ours. The Monte Carlo simulator allows testing strategies under different scenarios.

This is very similar to the work on complexity theory being done at the Santa Fe institute (as told in the Origin of Wealth). Nassim refers to their work later in the book:

The so-called complexity theorists came to the rescue. … Clearly these scientists are trying hard, and providing us with wonderful solutions in the physical sciences and better models in the social siblings (though nothing satisfactory there yet).

The key is the yet.

I’m holding out hope for complexity theory as applied to economics and finance. The classical equilibrium models don’t resonate strongly with my understanding of this world. Early research into the application of complexity theory rings very true.

Even if the numbers don’t hold out exactly, the model provided matches my understanding of people and markets much better. Nassim himself says it best:

Mathematics is principally a tool to meditate, rather than compute.

Lets hope it can deliver both.

From The Origin of Wealth:

Markets win over command and control, not because of their efficiency at resource allocation in equilibrium, but because of their effectiveness at innovation in disequilibrium.

Evolution, genetic algorithms and complexity theory, as applied to economics: It is a search problem.

This book foretells the demise of economic theories based on equilibrium. To tell the story, a wide path is walked through the history of economics, advanced computer science, physics and some chaos theory. Very interesting reading, if you are interested in economics, or why economics works or doesn’t (quite) work.

For a review, see John Hagel’s article.

This week’s Economist has a special report on international banking. With the rise in new types of financial instruments, and private equity firms, this is a very timely discussion.

With increased competition, the banks are scouring the globe for new markets to shore up their business.

Currently, the expansions have been into so-called BRIC markets (Brazil, Russia, India, China). The next horizon for expansion has been dubbed by Goldman as N11 and includes the following:

• Bangladesh
• Egypt
• Indonesia
• Iran
• South Korea
• Mexico
• Nigeria
• Pakistan
• the Philippines
• Turkey
• Vietnam

This is not a set of economies without risk. However, as the global investment banks set up shop, easier access to western style financial controls should improve matters.

Various pundits have been calling newspapers down and out in the media game. The reality, however, is not that simple. Instead, changing consumer interest has resulted in shifting demands for print media. Some companies are adapting to the changes, some will fall.

Steve Rubel points to data on the rise magazine advertising:

According to the Magazine Publishers of America, magazine advertising pages climbed to nearly 250,000 pages last year. While they’re down from their 2000 high of 286,000 pages, the trend line has been going up

And his analysis:

People like to peruse Vogue and GQ for the latest fashions and the ads are part of the experience. Second, I think it’s also because magazines are by their nature vertical and they allow people to dig deeper into the subjects that interest them.

I think the point of segmentation by verticals is the key here. The win is on two levels. On one hand, it engages the reader so boosts circulation. On the other hand, provides a targeted demographic to advertisers, thus boosting revenue and the quality of the product.

Not all magazines are winning:

… the rising tide is not lifting all boats. Time and Newsweek are both suffering as news really moves to the Web.

This gels with the comments of Peter Read Miller, a Sports Illustrated photographer, about the trends of his magazine. During his tenure, SI has gone from breaking the news of the games results, to a focus on the story behind the games. The four day lead time from the game to the publication is too long for SI to be first with the news.

Newspapers have much shorter lead times, typically a day, allowing them to have stayed relevant for longer. By having breaking news move to the web, the lead time expected by media consumers is now measured in hours or minutes, not days.

As with the magazine industry, some papers have failed to adjust to the change in their customer’s consumption of news. However, there are news groups that are bucking the trend.

A local example, is the Fairfax media group. Through some very smart moves their circulation is at a 12 year high.

For example, one of their major publications, the Age, is segmented into a host of magazine style sections. Each section is high in content, color, advertising, and is often in a tabloid paper size. This makes the entire paper, in essence, a collection of magazines.

They are also ahead of the local market in offerings such as blogs, photo slideshows and video content on their website, and have decided to reduce the physical width of the paper by 5cm. (This last one is a big deal for a newspaper).

Perhaps part of their success has been in staying local. There is much speculation on the web that local is the next battle ground.

From Don Dodge:

Local search is a huge opportunity. The local newspapers are in a great position to own it…but they don’t.

And Tom Evslin:

The importance of these statistics is that there is now a critical mass of people who can and will take advantage of and interact with rich LOCAL content.

Newspapers are inherently local. They have relationships with end consumers through their circulation department, and with local advertisers through ad sales. In the next few years, successful media groups will be making better use of these key assets.

My read on the industry? Newspapers are far from dead, but the market is changing around them. This will cause pain for some, while providing much opportunity to those prepared for change.

I expect to see even more consolidation in the coming years, such as Rupert Murdoch’s offer for Dow Jones. This will allow media groups to further diversify their publications, much as Google has diversified their web offerings.

Disclaimer: All opinions (and errors) are my own and do not reflect those of my employer.