BUSINESSWEEK ONLINE : DECEMBER 11, 2000 ISSUE
BOOKS The Best Business Books of 2000 The pendulum swing in technology is rocking the world of books. During 1999, publishers were smitten with all things digital, which meant topics far removed from Silicon Valley were neglected. This year, though, saw the return of an old favorite: volumes focused on finance and the markets. Indeed, such titles represent more than half of BUSINESS WEEK's picks for the top business books of 2000. Who would have believed that one of the hottest books of the year would contain 296 pages of unbridled number-crunching by an Ivy League economist, published by an academic press? Arriving just as the Nasdaq began its slide, Irrational Exuberance (Princeton University), by Yale University economist Robert J. Shiller, preaches that stocks have been ridiculously overvalued--thanks, in part, to pronouncements of New Economy believers in the media, various B-school professors, and, strangely enough, Federal Reserve Chairman Alan Greenspan. Together, says Shiller, they turned what is unquestionably a good story--high productivity and corporate earnings--into a fairy tale featuring soaring price-earnings ratios and ever-higher stock prices. In fact, Shiller predicts that the current stock slump is likely to turn into a prolonged period of stagnant returns. A sobering scenario, in a volume that BUSINESS WEEK Chief Economist William Wolman called ''dazzling, richly textured, provocative'' and ''by far the most important book about the stock market since Jeremy J. Siegel's 1994 Stocks for the Long Run.'' Also alarming is the story told in When Genius Failed: The Rise and Fall of Long-Term Capital Management (Random House) by Roger Lowenstein, whose previous book was Buffett: The Making of an American Capitalist. LTCM, you will recall, was the $100 billion hedge fund whose principals included two Nobel-laureate economists and a group of elite traders. In 1998, the company's vastly leveraged bets on various forms of arbitrage went sour, and in one month, LTCM lost $1.9 billion. Fear that its thousands of derivative contracts could drag down all of Wall Street prompted the Federal Reserve to gather threatened banks and ride to the rescue with a $3.6 billion bailout--a move Lowenstein believes was ill-advised. ''The author wades through the arcane world of arbitrage with a sure hand,'' observed reviewer Gary Weiss, who found the book to be a ''fascinating tale of world-class greed and, above all, hubris.'' An inside look at the central bank, its chief, and Washington politics can be found in Maestro: Greenspan's Fed and the American Boom (Simon & Schuster) by Bob Woodward, assistant managing editor of the Washington Post. It contains no startling revelations but is replete with the sort of fly-on-the-wall reporting for which Woodward is famous. What comes across most clearly is Greenspan's skill at the political power games that determine who survives in the cutthroat world of Washington. In particular, the author describes how the Fed chief forged close ties with Bill Clinton and other members of his Administration, including Treasury Secretary Robert E. Rubin. Reviewer Rich Miller found that, although Woodward ''gives Greenspan too much credit for the current boom,'' his ''unparalleled access to many of the principal players'' makes this a worthy addition to the author's oeuvre. Henry Kaufman's On Money and Markets: A Wall Street Memoir (McGraw-Hill) provides an account of the life and intellectual development of one of the most powerful men on the Street during the 1970s and '80s. Kaufman helped set up Salomon Brothers Inc.'s legendary money- and bond-market research unit and, in time, made it onto Wall Street's largest and most influential research team. Because of his contributions to the rise of economic and financial forecasting, Kaufman became a Wall Street guru who could, and often did, move markets. On Money and Markets recounts these experiences, along with the author's early years in Germany, his flight from Nazi persecution in the 1930s, and the years of studying economics and finance in New York. Reviewer James C. Cooper said that Kaufman ''writes with an objectivity and a rare clarity that can come only from experience and a thorough understanding of his subject.'' In The Power of Gold: The History of an Obsession (Wiley), Peter L. Bernstein takes on one of the mainstays of the financial world--and of misers through the ages. Bernstein, author of the best-selling Against the Gods: The Remarkable Story of Risk, here offers a panoramic view of how gold emerged as the manifestation of humankind's longing for power, beauty, and immortality. His story begins in Biblical times, runs through the Roman era and Middle Ages, the Spanish conquest of the Americas, the California gold rush, the catastrophe of World War I, and the Great Depression. He shows how gold became the foundation of modern currency and international trade right up until President Richard M. Nixon in 1971 discarded the practice of pegging the U.S. dollar to the price of gold. Said reviewer Eric Schine: ''Bernstein's volume is a tour de force with a satisfying conclusion: The characters in this drama prove themselves 'fools for gold...chasing an illusion.''' For another exploration of the financial world of yore, there's Millionaire: The Philanderer, Gambler, and Duelist Who Invented Modern Finance (Simon & Schuster), by British writer Janet Gleeson. This biography of the pioneering 18th century Scottish banker and financier John Law, described by the author as the ''financial wizard of his age'' and the virtual inventor of paper money, reads like John Kenneth Galbraith crossed with Danielle Steel. There are slashing rapiers, daring prison escapes, palace intrigues, financial cupidity, and illicit sex--and, in the process, one learns about the dawn of high finance. As head of the Banque Generale, Law helped to revive France's beleaguered 18th century economy, but by 1720 he was in jail as a result of his key role in the ruinous Mississippi Company bubble. ''Thoroughly researched, Millionaire is a marvelous read that animates its flawed hero while intelligently illuminating his time,'' reported reviewer Mark Frankel. A more modern but equally gripping drama can be found in The Informant: A True Story (Broadway Books) by Kurt Eichenwald, a New York Times reporter. This tells how Archer Daniels Midland Co.'s Mark Whitacre blew the whistle on his company's massive involvement in price-fixing--and how Whitacre subsequently was revealed to have embezzled millions from ADM. The Informant depicts a corporate world replete with covert meetings, secret codes, and industrial espionage. The federal investigation ultimately led ADM and co-conspirators to settle federal charges to the tune of more than $100 million. ''Using loads of new evidence and in-depth interviews with players on every side of the drama, Eichenwald constructs one of the most compelling business narratives since Barbarians at the Gate,'' said reviewer Mike France. Could a sharp slowdown in tech spending presage a huge economic bust? Michael J. Mandel's The Coming Internet Depression (Basic Books) asserts that today's New Economy has not ended the boom-bust business cycle--but rather transformed it into a ''tech cycle,'' with longer expansions followed by deeper and harsher recessions. At the heart of Mandel's analysis is the role of risk capital, which has taken over much of the funding of innovation. Mandel, BUSINESS WEEK's economics editor, worries that a falling stock market could lead sensitive risk capitalists to refrain from backing startups. The resulting decline in innovation might mean a concomitant reduction in productivity growth. Meanwhile, with labor and product markets tight--and with established companies more able to raise prices given reduced competition from startups--inflation could reappear. This could prompt the Fed to raise rates--a blunder, in the author's view. Economist Hernando de Soto's The Mystery of Capital (Basic Books) tackles another worrisome matter: Why is so much of the world stuck in poverty, while other parts are dazzlingly rich? The answer, says the Peruvian scholar, can be found in the failure of developing countries' legal systems to acknowledge and respect the property of the poor. The majority of people in such lands live as squatters. Without legal title to their land, homes, or businesses, they can't use them as collateral for loans. De Soto argues that reforming the legal system would free that ''dead capital''--which he estimates to be as much as $9 trillion worth of assets--to become an engine for growth, as capital is in rich countries. Reviewer Peter Coy found that ''de Soto overreaches by dismissing other theories about the persistence of poverty,'' but he added that the ''provocative and elegantly written book...performs a useful service.'' Finally, there's The Chief: The Life of William Randolph Hearst (Houghton Mifflin) by City University of New York historian David Nasaw. This thoroughly researched volume must be regarded as the definitive life of the media mogul. Riches from his father's mining bonanzas financed Hearst's youthful profligacy, his journalistic experimentation with the San Francisco Examiner, his building a turn-of-the-century newspaper empire centered on the New York Journal, and his repeated runs for political office. But perhaps the most flamboyant period of Hearst's life took place in Hollywood, where he conducted a long-term affair with chorine-turned-movie-star Marion Davies, and where, in 1919, he set up his own movie studio. During the 1930s, Hearst helped Franklin Roosevelt win the Presidency--then became an apologist for Hitler and started a virulent anticommunist witch hunt that would stretch into the 1950s. Although Nasaw's book leaves unsolved many of the mysteries of Hearst's life, it would be hard to imagine a more complete rendering of the publishing magnate's life. COMPILED BY HARDY GREEN _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS The Best Business Books of 2000 TABLE: The Best Business Books of 2000 INTERACT E-Mail to Business Week Online

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