Anthony Bolton - Investing Against The Tide

This is a pretty light collection of advice and recollections from a highly successful fund management career in the UK and Europe.  Boton went on to have a considerably less successful second career in China between 2010-2014, which somewhat tarnished his reputation but, nonetheless, he’s definitely an investor worthy of some further study.

Breezy generalisations that are later contradicted and seemingly simple rules of thumb that are subject to endless exceptions are par for the course in this book.  For example, we are advised not to take tips but are also quoted Nils Taube’s observation that investment is plagiarism.  Bolton disapproves of target prices, which I would wholeheartedly agree with, but later advises that a stock reaching its target price should be sold.  Later, price ‘ranges’ are recommended as more acceptable in what is probably sound advice.  In any case, far from putting me off, these idiosyncrasies endeared the book and its author to me.  Bolton is the consummate eclectic, using complex formulae to assess balance sheet risk while simultaneously meeting with Fidelity’s in house chartist to pour over the tea leaves.  He talks about the importance of having a breadth of knowledge for success in fund management; a sentiment I wholeheartedly agree with.  Privately, I hear he is an enthusiastic composer of music too.  In this varied, and somewhat haphazard, approach I see a genuine investor who reminds me of other great investors I have met insofar as he has found a style that suits his personality and has broadly stuck to it.  He even invokes this principle himself, advising people to, “Find a style or method that suits their temperament and then stick to that approach" (p156).  Exactly what this style is may be harder to pin down precisely, as is almost always the case!  

There were a few things I would broadly disagree with: First, the purity of philosophy.  Bolton holds himself out to be something of a purist and often states rules but the reality is that he is more of a magpie, or perhaps a fox if we use Isaiah Berlin’s framework.  He collects lots of different, disparate pieces of information and how these factors combine to create a portfolio is really anyone’s guess.  A quick glance at his best and worst performers at the end of the book show his tastes to be very catholic, displaying no particular aversion to any part of the market.  To be sure, there is a lot of useful information on how Bolton goes about his job in this book.  However, I reject the conception of Bolton’s style as formulaic and easily replicable.  Some of his decisions seem mercurial and are not easily explained by the investment philosophy advocated in this book.  Bolton’s incredible prescience in buying and selling Cairn Energy, at the time a small oil and gas explorer, bears no relation to the style he espouses as far as I can see.

Bolton’s use of models is another area where I find myself in some disagreement with him.  I see the future as so unknowable and non-linear, and models as so open to manipulation, that I see little value in this elaborate exercise in attempting to predict the future.  Simple models are useful insofar as they may demonstrate to you what broad assumptions you’re making about a company’s prospects however I definitely place lesser importance on them than Bolton who sees them as central to his process.

Bolton sometimes casts himself as a long term investor and I don’t think this is really the case.  For example, on p199 in re. hedge funds, quants and momentum investors he writes, "in some ways the market is more efficient, certainly in reacting to short term events.  However, I am convinced that the growth of hedge funds, momentum investors and quant funds all jumping on a trend has led to periods of mis-pricing and led to great opportunities for investors taking a longer term view".  However, he mentions his average holding period might be around 18 months, which is short term to me although it is long term compared to some other strategies.  I’d be interested to know the turnover ratio for his Special Situations fund, for example.  In any case, I don’t see him as a truly long term investor and some parts of his strategy are more akin to a trader; e.g. chartism and market timing.  

He also claims not to look for takeover targets or to involve himself in market timing but then goes on to write quite extensively about the role both play in his style!  To reiterate, I don’t think this makes him a bad fund manager, or that this makes it a bad book.  Nonetheless, I do think it shows how flexible successful fund managers can be in their thinking and this flexibility may be one reason for their success.

Price is another good example of several contradictory things being said simultaneously.  Bolton is against the totemisation of price and writes that he tries to forget it immediately after he has bought a stock as valuation is so much more important (p32).  He even goes so far as to say fund managers would perform better without access to their own performance data (p145).  However, he also makes looking at price charts a key part of his investment process and makes comments about using them to assess a company’s prospects (p107-8)!  His predilection for chartism, one of the purest forms of analysis using only the price, seems similarly contradictory.

I’m also against Bolton’s section on the traits that make a good fund manager.  Perhaps there are very broad shared characteristics to be found in all good fund managers and it may be a worthwhile endeavour to contemplate this question even if they do not.  However, my guess is that when a successful fund manager talks about this topic all they end up doing is talking about how their characteristics have helped them.  Or, more accurately, how they think their perception of their characteristics has helped them.  Can we really talk about good traits in fund managers in a discipline so broad? Is it helpful?  My guess is probably not but there are some interesting observations in what Bolton writes so it isn’t terrible.

Areas where I would agree with Bolton’s philosophy with varying degrees of enthusiasm include: His insistence on honesty in the people associated with your investments.  You must trust the people who run the businesses that you invest in and if you can’t trust them then you can’t invest with them.  A dishonest management team or owners can mean that you never see any of the money that a company makes, even if these profits are wonderful on paper.  

I’m a big fan of his people focussed approach.  All businesses are run by people and they can have a huge impact on a company’s fortunes depending on the industry it operates in.  Regardless of the industry, people are very important to all businesses and I agree with Bolton’s extensive management meetings as a way of establishing the calibre of the people he is investing in.

Bolton’s insistence on integrity was also something that appealed to me and I do think that the book shows him in a broadly positive light in this regard.  For this reason I was surprised to read about his investment in casinos, including US online gaming when it was illegal.  This resulted in big losses in Party Gaming and Sportingbet.  I was also surprised to see his ownership of cigarette companies.  However, people have different ethical standards and I’m not suggesting that he has done anything dishonest.  To a lesser extent, I was also surprised to find Bolton an advocate of more bank regulation in the aftermath of the 2007-8 credit crisis.  While I agree that heightened supervision, especially of leverage, is desirable I also feel like the increased burden of regulatory compliance encourages consolidation in the industry and leads to “too big to fail” and all the horrors of moral hazard attendant!  I would prefer some regulation to focus on fragmenting the market to spread risk amongst more institutions.  In fairness some new banks have been created with encouragement from the regulator but I’d prefer to see larger steps in this direction.

Lastly, Bolton strikes me as a true eclectic and a life-long learner, which are two things that may be useful in a discipline as broad and varied as fund management.  I realise that I’m now contradicting my earlier stated aversion to identifying common traits amongst fund managers on the grounds that the discipline was too broad and too varied! By doing so I’m placing myself with Bolton as a flexible, eclectic thinker with a genuine passion for knowledge and speculation.  One who, like all good fund managers, is totally unafraid of contradictions!

On the whole, it was a decent combination of some general information on how Bolton picks stocks, notwithstanding his highly eclectic style, and reminiscences about his career.  It’s far from a classic of the genre and the insights are hardly spectacular but it’s a quick, easy and fairly interesting read.

The following will attempt to summarise the things I noted and learned:

TYPES OF STOCKS HE LIKES & STOCK SELECTION

• Cash generation is preferred to growth and consistently cash generating businesses are the best
• Sensitivity to factors outside a company’s control reduce the quality of a business
• L/T charts of price, P/E,B,S & EV to EBITDA (I’m less sure about last one), director dealing, management shareholdings, history of short interest, top shareholders, broker sentiment, earning upgrades/ downgrades, CDS spreads & history, size of pension fund liabilities to market cap
• Invest in trustworthy management, ask questions in the negative not positive (not always)
• Every stock should have a simple investment thesis comprehensible to a teenager. This should be checked regularly and is far more important than price targets. Bolton prefers price bands.
• He likes cheap shares because of the "margin of safety" they afford and says he would always chose a 5% growth coy on 5x to 10% on 10 or 20% on 20x. He likes to look at historical valuation ranges.  Also likes Holt, Quest and CROCI analyses.
• Jeremy Grantham, "growth companies seem impressive as well as exciting. They seem so reasonable to own that they carry little career risk. Accordingly, they have underperformed for the last 50 years by 1.5% pa. value stocks, in contrast, belong to boring, struggling, or sub-average firms.  Their continued poor performance seems, with hindsight, to have been predictable, and, therefore, when it happens, it carries serious career risk. To compensate for this career risk and lower fundamental quality, value stocks have outperformed by 1.5% pa." 94
• Once a bid has been announced it's usually worth waiting unless you think it won't go through. Other bids may appear etc. Good acquisitions can be +ive for the acquirer but he is leery of "transformational" or "once in a lifetime deals" involving a high price / big premium.  Unconventional financing such as covenant-lite loans or convertible preference shares usually a bad sign.
• Chapter 10 - v interesting on turnarounds and unloved shares.
• Peter Lynch, "does it sound dull, or even better, ridiculous? Does it do something dull? Does it do something disagreeable? Is it a spin off? Is it disregarded and not owned by institutions or not followed by analysts? Do rumours abound involving something like waste or mafia ownership? Is there something depressing about it? Is it a no-growth industry? These are all characteristics that tend to put off the majority of institutional and private investors and can lead to attractive investment opportunities" 91
• Underperforming retailers / brand owners can improve via incremental small gains but should not be confused with weak franchises. Intra-Sectoral comparison can be useful here.
• Falling dollar can be good for UK retailers and TV coys that buy product in $
• CEOs with bodyguards for no ostensible reason shouldn't be trusted!
• Like AT he likes companies with the share price in the lobby. AT includes "today's price....tomorrow is up to you"
• He is a big believer in radio even in an online world

TRADING

• Warns against doubling down, saying "in general it's not good practice to try and make it back the way you lost it" (32)
• Good on the psychological factors associated with purchases and sales: easy to buy in an uptrend, harder in a downtrend. Buying a share that has fallen to your desired price is often hard because we are influenced by the opinion being expressed by the market
• Once we buy / sell a share this often cements our +ive / -ive opinion and closes one's mind to new evidence
• Everyone thinks they are better at investment than we are
• We are too conservative taking gains and too relaxed running losses
• Investors underestimate likelihood of rare events normally until they happen and then their probability is overestimated because we are all overly influenced by the short term
• He holds for quite a short period (18m) and seems to believe he can identify "valuation anomalies", which is probably overconfident and misguided

PORTFOLIO CONSTRUCTION

• Try to win by not losing too often. Like AT, risk is losing money.  Suggests writing down all stocks under headings Strong Buy, Buy, Hold, Reduce, Sell, ? every month
• For the most part he stays pretty fully invested and takes a "gradualist" approach, reducing risky stuff in a bull and adding in a bear - or attempting too!!
• 50 stocks is a good size - i think a few more depending on % in small cap
• Only wants to own big defensive coys in size >200bps and would rarely go over 400bps
• Reasons to sell: 1) change in thesis 2) reached price target (another contradiction of his aversion to TPs) 3) better ideas - also i would add 4) if you buy the wrong stock
• Beware unintended bets for e.g. Lots of currency or interest rate exposure

RESEARCH

• Read original coy docs not reports. Especially IPO and issue docs as they are heavily independently supervised and contain more info than usual.
• He places a lot of importance on models, which is mainly BS in my eyes notwithstanding the fact that investors must use what they find helpful
• Balance sheet risk is the biggest factor in losing money. He uses H-scores and Z-scores to assess this risk and a service called company watch.
• Avoid using PE for lumpy businesses like housebuilders, PB better
• Likes technical analysis and uses it as an overlay for fundamental analysis.  If it agrees then it will increase conviction, and if it disagrees he may go back and check his research. Also uses it to generate ideas for further research and used to have his portfolio analysed by a chartist. Also like to look at ratios as charts and read them. Graphical representation is a quick way of placing a factor in its historical context. AT always liked to turn them upside down!!
• Ask brokers what services no one uses and, similarly, like DG said, which stocks no one asks about!!
• Look at consensus and bet where your opinions are v different. Akin to a tissue in gambling

MARKET TIMING

• Safe yields are good way of limiting downside. Break up values and PEG ratios are bull market signs while divvy yields and coverage ratios are more in vogue in bear markets
• Big private equity deals are a bull market sign because of the prevalence of debt. Uncontrolled coys with large cash balances and / or strong cash flow are usually targets but he dislikes trying to identify M&A takeover targets.
• "Often you need to buy a recovery stock before you have all the information and it doesn't feel comfortable making the purchase - don't be put off by this.  By the time all the information is there and the recovery is established, an investor will have missed some of the most rewarding times to own the shares" 92
• Don't time the market! The majority are always proved wrong.
• Bull markets go on longer than you expect and bear markets can have a couple of false starts before they really get going. Tops and bottoms usually have a V shape, which is a ^ at the top. End of bull markets usually have a blow off of v strong price action in a short period of time.  
• "At tops, it's not that the news stops being good, it's that it stops getting better, with the reverse at lows" 135
• The beginning of two middle east wars marked market lows in his career as the market was v early in anticipating them meaning it was in the price by the time they started
• "Markets bottom not because of the appearance of buyers but because sellers stop selling and there is a similar process at tops" 136 - monitoring cash positions is interesting in this regard
• The outlook for the economy is not what's important at market tops, it is almost always good, rather it is the assumptions that are contained in the share prices that are dangerous / risky. Economic outlook is essentially useless as it is good at the top and bad at the bottom = lagging indicator
• 3 factors for judging market timing (again, something he claims he doesn't do!) - 1) length and distance travelled in bull / bear market 2) indicators of investor sentiment - put / call ratio, broker sentiment, breadth, volatility, mutual fund cash positions etc. 3) LT PB and PFCF - he says if all three agree then you will get the right quarter. Is this true for current bull market?

DESIRABLE QUALITIES FOR A  GOOD FUND MANAGER

• "Often there is so much analysis of the branch or even the leaves on the branch, there are fewer people taking a view on the tree, let alone a view of the forest" 139
• Grantham "the stock market fluctuates many times more than would be suggested by its future stream of earnings or dividends or by the GNP, both of which are remarkably stable: i.e. the market is driven by greed, fear and career risk, not economics.  Real risk is mainly career and business risk, which together shape our industry.  efforts to reduced career risk - "never be wrong on your own" - create herding, momentum and extrapolation which together are the main causes of mispricing." 139
• "I've always thought the best environment in which a FM could perform well was one in which they didn't know how they were doing" 145
• What to do when you're doing badly - 1) see how much your views agree with consensus and are therefore risky 2) keep conviction around 50% where 0 is no conviction and 100 is never change your mind 3) stick to principles and don't do things you don't believe in 4) draw up start from scratch portfolio and compare to actual 5) make sure you're spending enough time looking for new ideas 6) look at the portfolio as a whole - are highest conviction bets big enough etc
• Temperament is more important than intelligence - ability to deal with success and failure, willingness to make mistakes
• Organisation also v important as events can consume the whole day. One should dedicate the majority of the day to reading and planned activities not market watching or new flow following
• Breadth of knowledge is important - cf charlie munger
• Very cynical people don't make good investors - true? Have to be able to change your mind and move on - although stubbornness can be helpful too!
• Be your own person and don't take comfort from the crowd. John Maynard Keynes "worldly wisdom teaches that it is better for the reputation to fail conventionally than to succeed unconventionally"
• Never stop learning
• Know thyself
• Integrity is key - both with other people and yourself
• Every good FM will have an underperforming year (bolton 1989, 1990 and 1991 - strange not during tech bubble but perhaps not that big in UK?)

MISCELLANEOUS

• In 70s the punishment for entering the stock exchange floor without being a member was a de-bagging!! P195
• He is against stamp duty and advocates reducing the risk of a PE takeover in listed equities by increasing leverage

Bob Ward - From Nazis to NASA

Incredibly precocious and driven towards his goals, Wernher von Braun was a headstrong and unruly child with a predilection for thrill seeking and testing the rules.  Whilst he always displayed a strong intellectualism, he only really began to apply himself to his studies, especially Maths that he initially disliked, when he became obsessed with rockets and the idea of travelling to space.  The idea of space travel has now entered the popular consciousness to such a degree that it is now probably impossible to imagine how radical this idea was for young, aristocratic German schoolboy.  Appreciation of Von Braun’s technological abilities are largely too technical for a layperson to comprehend; however, his status as a visionary regarding space travel is plain to see.  

A voracious reader and polymath, von Braun was convinced of the incomparable philosophical and scientific value of space travel.  Initially, most thought it an ill-conceived, and even sacrilegious, fantasy.  Latterly, some criticised the spending of billions of dollars on a project with little immediate tangible benefit to society, suggesting the money might be better spent on alleviating poverty or other problems closer to home.  Von Braun emphasised the longer term benefits such a project might bring.  First, scientific innovation; for example, satellite technology allowing data to be shared worldwide in an age before the internet.  The applications were myriad; monitoring crops, tracking shoals of fish, beaming lesson plans to classrooms in Indian villages without electricity and many more.  Of course, many other scientific innovations were derived from the space program too.  Secondly, von Braun also championed the philosophical value of space travel.  Not primarily as a means of demonstrating America’s cultural and intellectual superiority to the USSR, which was probably the government’s major motivation, but rather as the source of mankind’s ultimate salvation.  Building a ‘bridge to the stars’ could allow us to outlive the burning out of our sun and escape our evolutionary destiny.  He was also clearly captivated by the magical inspiration of space travel and man’s ability to leave his own planet.  There’s no simple answer to this question and I didn’t feel like this book was the right place for an exhaustive discussion, which it, rightly, doesn’t attempt and I’m sure could occupy several thousand pages!  However, the testimony of von Braun and the author should clearly be taken with a pinch of salt given their extreme passion, and subsequent bias, about the subject!!  

Von Braun was a magnetic, good-looking and extremely charming individual with exceptional talents for leadership.  He was a very hands-on manager, with a high level of  technical ability and a tireless learner and reader who always asked pertinent questions of his subordinates.  He seems to have been very adept at building relationships, motivating teams and making those under him feel valued and important.  He seems to have been extremely loquacious and enjoyed talking to anyone really!  As Ward summarises in the Epilogue, “he was a leader, with the versatility that leaders of genius must possess.  Because he worked with rockets, I would call him a rocket man, but that is a cold term, and he was anything but cold.  He was warm and friendly man, interested in everyone around him, no matter who they were.  He had a marvelous knack for explaining his machines in simple, understandable, human language.  And he never seemed to busy to share his ideas - and he was full of them - with others” (p309).

Despite his personal charisma, the question remains: Did he really care about anything except progress in rocket technology? Clearly this was his guiding principle and he used multitudinous means towards this end; like most single minded activities, this has positive and negative aspects.  His achievements seem to bear testimony to the practical efficacy of this myopia.  However, he arguably had little loyalty to anything except his work; switching sides from Germany to the US and then later from NASA in Maryville to Washington without taking any of his staff, who had been with him since WW2.  Personal traits detailed in the book, such as never carrying any cash and never returning borrowed items, could support a hypothesis of a man who didn’t really care about anyone, or anything, else but himself and his project.  To me, the magnitude of what he achieved make it almost certain he was this type of man.  The allusions made to his enjoyment of the company of women could be interpreted as evidence of a similar attitude regarding adultery although the author dismisses this idea without really providing any evidence for this decision.  This tendency to see the best in Von Braun recurs throughout the book whenever tricky questions arise.

Arguably the most pressing moral questions in the book relate to WW2 and his role as the head of the V2 rocket program under Hitler.  First, was von Braun moral responsible for the casualties caused by the rockets he designed?  Here we find him responding eloquently and persuasively in a letter, “‘When your country is at war, when friends are dying, when your family is in constant danger, when the bombs are bursting around you and you lose your own home, the concept of a just war becomes very vague and remote and you strive to inflict on the enemy as much or more than you and your relatives have suffered.’ (p69).  Nonetheless, it seems odd that he immediately forgot these concerns when he surrendered to the USA at the end of the war, something someone who prioritised loyalty to one’s countrymen would probably never consider.  Against this, one could argue that the mentality described in his letter is one that only exists in times of war and once the brutality of conflict ceases, this mindset ends too.  Secondly, the rockets he designed were built by POW in atrocious conditions in an underground mine to avoid bombing by Allied planes.  Again, the circumstances of war and the emotional and psychological states it produces make this a highly complicated moral question.  However, claims that he was unaware of these conditions should surely be considered false given his obsession with detail and intricate knowledge of all other parts of the project.  The ultimate decision to adopt this form of manufacturing wasn’t his and he was, in all likelihood, powerless to alter it but could he have absented himself from the project without risking harm to himself or his family?  I suspect only a very few people would have sufficient knowledge of the circumstances and political climate at the time to give an accurate assessment of these risks so I won’t attempt to answer this question.  However, I suspect that von Braun’s single mindedness about rocket science was the deciding factor; I can’t envisage him wanting to stop work regardless of the obstacle placed in his way.  He would have always found a way to rationalise things to himself, such was his dedication to his passion.  The author himself, perhaps in thrall to von Braun’s personal charms, is keen to absolve him of any wrong doing to the extent that he includes this passage: “Ironically, a number of US and Allied military experts, including Winston Churchill and Dwight Eisenhower, came to the conclusion that because Berlin spent millions of Reichsmarks and precious labour and material on Dornberger and von Braun’s rocketry efforts, instead of building more warplanes and tanks, thousands of Allied soldiers’ lives were probably saved.” (p70).  While this may be a highly charitable interpretation of his role, this does not necessarily prevent it from also being correct.  I feel it is probably an impossible question to answer objectively.

Von Braun’s membership of the SS has some similar characteristics.  Ward draws von Braun as fairly apolitical, albeit with liberal leanings, and certainly not as a supporter of either Hitler or the SS.  However, he ends up joining the institution out of political necessity given his high status within the German Army.  Again, it’s not possible to tell how avoidable this was but I suspect it was close to mandatory in a Fascist state during a war when one would doubtless suffer extreme paranoia and anxiety about the safety of oneself and one’s family.  In the end, his membership proved crucial in allowing him to forge orders on SS stationary allowing him and his team to escape Peenemunde and eventually surrender to the Americans at the end of the war.  As to whether one actions justifies the other, these are precisely the kind of unanswerable questions that the conditions of war throw up in abundance and to which I claim no special ability to be able to answer.  The author, clearly a fan of both von Braun and space travel more generally, seems to think the ends justify, or at least excuse, the means.   What I can say is that I’m not sure I would have acted any better, and perhaps I would have done considerably worse, if I were placed in his von Braun’s shoes.  

Von Braun’s time in America is considerably less problematic in moral and ethical terms.  Initially bored in the US as him and his team were treated with suspicion by their new bosses; much of their work was limited to explaining the superior rocket technology they had developed at Peenemunde.  However, von Braun took the opportunity to travel widely dispersing his ideas about space travel, which he had been unable to do in Germany.  A natural salesman he soon had considerable success to this end and received good funding from the US army and a move to  the leafy NASA centre at Huntsville, Alabama from the hot monotony of the desert at Fort Bliss in Texas, which seems to have been anything but blissful!  What followed was a meteoric rise up the NASA hierarchy hindered only by anti-German sentiments and internal politics.  He made huge and wide-ranging contributions to the Apollo space programs and his team’s Saturn V rockets were instrumental in taking the first man to the moon.  Some part of this is due to the concatenation of circumstances; namely, the huge importance, and equally large funding, given to the project by JFK owing to its importance in the context of the Cold War.  As mentioned earlier, his switch to Washington, an apparent attempt to drive further missions to Mars, were disastrous and he ended up working for Fairchild Industries for the latter part of his career in a role that seems to have been a mixture of engineer, project manager and space superstar turned salesman with the emphasis on the latter!  

Biographies are inevitably written by people who have a passion for the person whose life they detail.  As such, most biographical authors will possess a level of knowledge and detail that far surpasses the scope of single book and the appetites of the lay reader.  Balancing completeness against the need to create a narrative simple and engaging enough for the lay person to enjoy is a ubiquitous challenge.  Bob Ward includes some excellent chapters on von Braun’s personal shortcomings and habits (e.g. 12 - ‘Nobody’s Perfect’ & 15 - ‘En route to Victory’).  They’re full of quirky, idiosyncratic details and create a vivid and evocative portrait of a complex, multifaceted and flawed genius.  Other chapters, for example chapter 1, are less good, lapse into hagiography and reveal very little about von Braun’s character. Some of the anecdotes are so hackneyed that it doesn’t matter if von Braun was their originator, which I strongly suspect he wasn’t, they are simply too cliched for inclusion.  In fairness, with the exception of the first chapter, there are probably only two or three really jarring instances of this fault.  Another shortcoming, which is far less gratuitous and annoying than the banal anecdotes but more common, is a tendency to focus too heavily on the machinations within NASA.  The author clearly followed his career so closely while he was resident at Huntsville, Alabama that he seems to have lost some critical perception as to what level of detail is appropriate for the audience.  Clearly, this judgement is objective and there will surely be readers who are especially interested in this period; for example, those from Alabama or with a specific interest in NASA.  However, for me it was all a bit esoteric.

On the whole, I found this to be an average account of what was clearly an exceptional life.  It is very thoroughly researched and this turns out to be both a blessing and a curse.  There are some truly excellent sections and some rather underwhelming ones and I felt like the book would have benefitted from more sagacious selection of material given that the author clearly had so much to chose from.  It provided an interesting biographical sketch of von Braun, raised some demanding moral and ethical questions about his career and described the post-war development of NASA’s space programs from an interesting perspective.  At its best it’s provocative and insightful but in its weaker passages it slips into platitudes and sycophancy.  Other passages are overly detailed and a bit dull.      

Bastian Obermayer and Frederik Obermaier - The Panama Papers

This is an interesting and very thoroughly researched account of the ‘Panama Papers’ leak from the law firm Mossack Fonseca that began in 2015.  The amount of data released is staggeringly large, some 11.5 million documents or 22.6 terabytes of data.  The journalists involved needed very expensive and advanced computers to search such a large database, including a $20,000 super computer!

The German journalists who originally received this data leak from an anonymous source shared the data with other investigative journalist around the world through an organisation called ICIJ (The International Consortium of Investigative Journalists).  As such, hundreds of journalists from different countries simultaneously searched the data for high profile figures in their countries and collaborated together on building evidence and writing stories.  The whole project was kept secret for probably 12-24 months, which is a staggering achievement given the sensitivity of the data and the number of people involved.  It says a great deal about the integrity of the consortium and its members!

Essentially, there is really one story; the rich and powerful make extensive usage of offshore companies and trust structures to move and conceal their assets.  These same structures are used by thieves, gangsters, terrorists, drug and human traffickers and all sorts of other criminals too.  They are also used by lots of the world’s largest corporations to avoid tax.  We are taken through several iterations of how the journalists built up evidence of such dealings for politicians, art dealers, corporate executives and footballers.  This gives a good example of the journalistic technique involved but the point, for me at least, always remains the same: Why are these structures allowed to persist? I really struggle to think of a legitimate use for a company with nominee directors, nominee beneficial shareholders and zero transparency on ultimate ownership.

I read in the FT yesterday (May 2017) that assets in the BVI have doubled since 2010 to $1.5trn.  Two-thirds of these companies are used by corporations for ‘tax structuring’ so it certainly doesn’t seem like the Panama Papers have caused a big fall in their usage.  It is probably worth noting that the majority of corporations using these structures don’t use illegally obtained assets, which making them less gratuitously illegal than say Putin’s best friend amassing billions of dollars in Russian shares.  However, the question still remains as to why these structures are allowed to survive, and flourish, today.  One possible answer might make appeal to the sanctity of privacy whereby we shouldn’t be obliged to divulge everything to the government.  However, as the authors point out, all that would be required here is the name, date of birth and business address of an asset’s owner.  This sort of system already exists in some Scandinavian countries although, presumably, their citizens could still use offshore structures to avoid it!  A more likely explanation may be that these structures suit the rich and powerful very nicely and so they will be very reluctant to seem them go.  This argument holds for countries as well as individuals as both the US and the UK benefit from the existence of tax havens within, or closely linked to, their jurisdictions.  Neither argument have much merit to me but the latter strikes me as the far more likely explanation for their continued existence.

These structures are really a slap in the face to the average citizen of an average country.  They’re saying explicitly what many people probably intuited already; there is one rule for you and another for people with money or power.  I see this as a serious problem and one that is only likely to get worse as changes in technology and data leaks like this one make secrecy harder and harder to achieve.  As Brunello Cucinelli, the CEO of cashmere company whose clients would certainly be rich enough to use the type of products offered by Mossack Fonseca, says, “Mankind is becoming more ethical, but it is not happening because man has decided to become better than he was 100 years ago. It’s because we know we live in a glass house where everybody can see.”  Leaks like the Panama Papers demonstrate the veracity of this idea and it seems like increasing digitisation will see this trend continue notwithstanding improvements in encryption.

One of the most evocative examples given in the book concerned a man whose father had lost a famous Modigliani painting, Seated Man with Cane, to the Nazis in occupied France.  The painting had been auctioned by the Nazis, disappeared for a while and then been auctioned again by Christie’s in 1996 to an offshore company without named beneficiaries.  When a relation of the looted art collector attempts to have his painting restored to him, the court finds it has no official owner and so the suit is withdrawn.  The Panama Papers reveal that the gallery owner Helly Nahmad, who had displayed the painting twice since its purchase at Christie’s and was suspected to be the current owner, was in fact the ultimate beneficiary even though he denied this on several occasion in order to keep the stolen painting.  It’s a sad story of dishonesty and a lack of decency.  I can’t comment on the strength of the legal case presented but I think it is obvious to everyone that Nahmad lied about his ownership of the painting.  Encouragingly, this painting was seized at the Swiss Freeport in 2016 as a result of the Panama Papers.

What about all the other people mentioned in the leak?  Have they been held to account and brought to justice?  Without having investigated each case individually it’s hard to comment definitively.  However, I have the overall impression that not a great deal happened after these incredible revelations.  Perhaps it’s because, in most cases, the ultimate beneficiaries of these companies and trusts are protected by the law.  If that’s the case, it’s simply yet another restatement of the double standards that exist for the rich.  Or as Leona Helmsley said famously, “only the little people pay taxes”.  In the end, whether it’s stolen state assets or untaxed assets moved offshore, the rich and powerful are still taking from those who don’t have much, which is the bleak and uncharitable reality.

This book is moving and powerful for the spotlight it shines on the dark corners of the global financial and legal systems.  It was also fascinating to learn about the journalistic practicalities of dealing with such a large and sensitive leak.  The negative points for me were the fact that, even though the individuals involved are different in each case, the stories have the same essential narrative.  So and so shouldn’t have an account or, better still, claims he doesn’t have one but then, lo and behold, he or she does have one! The style of prose was also slightly grating to me.  There is a lot mock surprise and attempted irony in the vein of, “X said he didn’t have any offshore dealings so it was confusing / surprising to find….” or “if X really didn’t have any knowledge, it’s odd to find him sending an email to….”.  I didn’t particularly enjoy it and found it got a bit repetitive.  On the whole, it was an informative account of an amazingly large data leak and the staggering amount of hard work the journalists involved with the ICIJ did to bring their findings from the data to press.  All of them deserve our thanks and congratulations for doing such important, and in some cases dangerous, work.

Nick Bilton - Hatching Twitter

I’d like to preface this by saying this is the only book about Twitter I’ve ever read.  I didn’t know anything about the company or it’s founders before I started and this is the only source that I have consulted in forming my opinions about it and them.  As such, I don’t claim any kind of objective veracity for my opinions, which are simply the impressions I formed while reading this author’s account.  In fairness to Nick Bilton, he seems to have researched this topic deeply and diligently but his is only one perspective, formed at some remove from the actual events, and I feel like these limitations should be acknowledged from the outset.

With that having been said, I found all four of the main figures are a bit nauseating personally!  With social skills in short supply, they all seems to betray one another and never air their true feelings face to face; preferring to go behind each others backs and avoid confrontation.  

To attempt a basic outline, Ev Williams is a quite likeable tech entrepreneur who is passionate about ‘push button publishing for the masses’, which seems worthy of respect.  To this end, he founds Blogger, sells it to Google and then quits to start another business, Odeo, with his neighbour Noah Glass.  This business focuses on podcasts and dies a death when Apple enter the market via its, then dominant, iTunes platform.  A young programmer called Jack (Dorsey) working at Odeo with Ev and Noah comes up for the basic idea for Twitter while DUI with Noah.  The three then work up the idea via ‘hackathons’ with various other employees at Odeo including the fourth co-founder Biz Stone.  Noah is the project’s first leader, helping incubate it with Jack at Odeo.  Jack, who seems to have brilliant ideas but be a little socially dyslexic, promptly goes behind Noah’s back and tells Ev to sack him and make him boss.  Ev does this and Jack runs the project, and latterly company, until Ev decides he wants to be CEO and ousts Jack as CEO by going behind his back and getting the board to remove him.  Ev also owned the majority of the company at this time and it seems money definitely spoke in this instance.  However, despite his effective removal from the day to day operations of the company, Jack, who retained the title of (silent) Chairman, goes on a media fuelled propaganda tour to inflate his profile before repaying the favour and managing to convince the board to get rid of Ev and re-appoint him!  Admittedly, Dick Costolo serves as interim CEO to soften the blow and Jack returns under the title of ‘Executive Chairman’ but it’s still an impressive feat for Jack to convince essentially the same board that got rid of him to then reinstate him despite Ev being the majority shareholder.  I should point out that I am assuming that Ev was still the majority shareholder but the book doesn’t go into much detail on the capital structure and equity holdings as the company evolves. I would’ve liked to know more, especially as I feel it’s relevant to the power struggles.  There would certainly have been further funding rounds since Ev became CEO so perhaps he had been diluted?  The book doesn’t relate.  Regardless of how impressive and tenacious this move was, I was still left feeling like all of the co-founders had a phobia of speaking openly with their so-called friends or treating them decently.  Is this just the nature of working with your friends at a company that is growing almost unthinkably quickly?  I sincerely hope that I’d have the decency to speak to someone face to face about a problem I had with them.  There again, perhaps these ‘friendships’ within Twitter actually signified little more than shared passions for technology, the project, fame or fortune that had nothing to do with love and personal affection.  The overall impression leaves you thinking, ‘it’s hard to believe how badly these so-called friends treat each other!’ Biz Stone comes off a little better but it is the best of a bad bunch, really.  His role seems fairly ill-defined but, according to the book, the venture capital investors were genuinely worried by his threats to quit meaning he must have been important at the company.  Perhaps mediating between the gigantic egos, power struggles and passive aggressive non-confrontations of the other founders; predominantly Ev and Jack as Noah had been ousted so completely, and so early in the piece, despite having an absolutely central role in the products creation, including the name.  However, this assessment of Biz’s job may be uncharitable given he is also mentioned on numerous occasions in connection with forming and preserving the culture of the company.  While this is hard to measure empirically it is of indubitable importance.  Perhaps the best example is when Biz attempts to stop Jack becoming a ‘moderator’ of some Twitter event with the President on the basis that the company’s culture forbade any role of this kind as it could be construed as Twitter participating in the conversation rather than simply hosting a platform on which it could take place.  Incidentally, when Biz sends an e-mail to point this out he finds that the recently returned Jack, now Executive Chairman, has suspended it!  This is typical of the kind of interaction between the four.

Another group who come out of the leadership struggles and changes looking very bad are the venture capital investors and board members.  Why are they condoning, and indeed facilitating, so much backstabbing and intrigue within the management, which must surely be detrimental to the company culture?  A charitable interpretation would probably appeal to the vastly different types of CEO a rapidly growing tech company needs during the various different stages of its development.  However, I don’t think this really holds true in this case.  Seemingly, Ev fires Noah in 2006-ish and Jack is CEO until late 2008 when Ev uses the board to remove him.  Seemingly this same board, plus one Peter Fenton from Benchmark was very enthusiastic about reinstating Jack and may also have bought a whooping great stake in the company, then ousted Ev in favour of Jack in only late 2010! Can so many changes really be justified by the needs of the company alone?  To me, it sounds far more like bunch of disingenuous schemers playing politics for money and power; both at the board and management level.  Fred Wilson and Bijan Sabet, from Union Square Ventures in NY, come out looking the worst at the board level.  Having helped Ev plot his removal of Jack in 2008 they then plot with Jack to remove Ev in 2010; talk about a toxic environment and a lack of trust!

The book itself painted some quite vivid pictures of the founders’ early lives and the early days of Twitter.  On the whole though, I found it a bit long on description and ‘setting the scene’ and a bit short on detail.  For example, the text has no dates in it so it is hard to get a firm grasp of the chronology.  I’ve also mentioned before I would have appreciated more detail on the capital and ownership structures.  Perhaps this sort of information is too niche for this type of book.  However, I felt like it would have benefitted from a few more dates and a few less descriptions of how many drinks these crrrrazy young entrepreneurs were imbibing! Given the large-ish cast of founders, company members, investors and hangers on the book should have had an index.  The prose can be a bit clunky in places too with one passage referring to how, “their sneakers tickled the concrete sidewalk”! Another passage I found irritating was, “In the past, history was always written by the victors.  But in the age of Twitter, history is written by everyone.  The victors became the ones with the loudest voices who get to tell their version of history”.  To me, this is deeply ill-conceived and does little more than restate, at length, and misinterpret the original material.  Namely, “the victors write history”.  In the past, accounts of what happened were clearly written by both the victors and the defeated.  However, the victors, who possess more money and power, have far more success in disseminating their version.  Exactly the same seems to be true of Twitter; lots of people write about an event and, ordinarily, those users who are most famous or have most followers succeed in disseminating their versions most effectively.  The passage does serve to raise the question of whether people tweeting are really ‘writing history’ or more accurately ‘writing source material’.  It’s possible to view the two as the same thing.  However, on the whole I felt like the both this passage, and the book in general, had a slightly awestruck tone in relation to Twitter’s technology itself.  Obviously, Twitter was a hugely disruptive and innovative force within society and has changed the way many people consume media.  However, I would probably have stopped short of describing it as changing the way history was written.  Has anything we consider ‘history’ today even been written in the past ten years, for instance?

There was one aspect of the book that caused me more trouble than any other.  It relates to the civil war between Jack and Ev.  Around p148 we are informed that Jack has been fired as CEO and will occupy a new role as ‘(silent) Chairman’, crucially without a vote on the board, which we are informed has been transferred to Evan.  To quote, “it would belong to Ev, who would maintain Jack’s voting rights...and would now have two board seats”.  Confusingly though, by the time we reach p259 and Jack is now in the role of ouster and Ev in the role of about-to-be-fired-CEO we find Jack seconding a motion to remove Ev.  How exactly has he managed to do this without a vote?  I found this bit the most troublesome because, unless I’ve missed something, the book seems to contradict its own assertion about what had happened, which is a fairly major flaw for a book purporting to be historical.  It’s quite a good example of how the author prioritised these sort of atmospheric, movie scenes above factual detail or lucid explanation of the chronology.

I learned something about Twitter’s history from this book, and it was enjoyable in places, but there were too many annoying mistakes and omissions for me to rate it very highly.