The Cynic’s Guide to Reading Business Books
How to get the most out of CEO biographies and business tomes — and not just the lessons they want to teach you
The book begins in medias res, at a moment of high tension. The author, a middle-aged journalist writing for a prestige business publication but worried about his financial future in an age of declining circulation and endless job cuts, quickly describes the protagonist. Musing on the lucrative speaking gigs available to a New York Times bestselling author, he establishes what his protagonist has at stake; as he outlines the consequences of failure, he inwardly cringes at the thought of the cost of a Park Slope apartment and an also-in-Park-Slope preschool.
With a second, much shorter paragraph, the stage is set: the prototypical business book has begun.
— Catchphrase: The Wild, Improbable Story of a Company Whose Hype Cycle Hopefully Peaks Right Around Our Expected Publication Date
I’ve read a lot business profiles. Successes, failures, frauds, fads, financial engineers — anyone who turned a little money into a lot or a lot into a little. And some of these profiles, the book industry decides, are worthy of the roughly 300-page treatment.
The book-length business profile is a unique genre, because it’s both a story and a manual. There are plenty of how-to books, but those books usually file the serial numbers off their examples. You could read someone’s vague advice on when to fire an unpopular high performer — or you can read about exactly what happened when one company had to do this and draw your own lesson from that.
Some people will read a book about Uber because they’re afraid of what the company’s doing, and others will read it because that’s what they’d like to be doing. Sometimes, you want a Horatio Alger story about a scrappy outsider who took on the establishment and won; other times, you want a Stephen King novel about the unspeakable horrors being unleashed at this very moment on the unsuspecting. Sometimes, it’s the very same book: one reader’s scrappy antihero is another’s amoral villain.
For a book to happen, you need a confluence of events: a story worth telling and people with an incentive to tell it.
But business information is valuable, and it should strike us as strange that we can spend $20 on Amazon for a billion-dollar idea. So it’s worth asking: What motivates business leaders and insiders to reveal these priceless secrets? Why would Ray Dalio want to tell you about the principles he used to make Bridgewater one of the world’s largest hedge funds? Why would George Soros want to share the strategies that have made him a successful investor?
For a book to happen, you need a confluence of events: a story worth telling and people with an incentive to tell it.
There are basically three incentives for people to tell their version of the real story: ego, fear, and resentment.
It’s easy to see that the Soros and Dalio books are driven by ego. You shouldn’t begrudge them some ego: Both got into a competitive field, and despite serious disadvantages (Soros’ status as an impoverished immigrant, Dalio’s extremely unconventional personality), both succeeded beyond their wildest dreams. Arguably, it’s great for the world that successful people feel the need to brag, because they can’t help themselves when they give away secrets.
Of course, they’re not giving away trade secrets. Both firms hold those pretty close to the vest. But they do give away frameworks.
Take Soros, for example: In The Alchemy of Finance, he offers a trading diary covering his decision to short the U.S. dollar in 1985. If you look at a long-term chart of the dollar, you may note that this was the single best time in history to short the dollar. But what’s striking in the book is his level of caution. Currency trading, Soros notes to himself, has been an interesting hobby to dabble in, but he lost money doing it in the early 1980s.
Why is Soros, who routinely lost money in currencies, now synonymous with currency trading? Because when he figured out what was working, he doubled down, repeatedly. The deep wisdom from Soros’ autobiography has nothing to do with currency speculation per se and isn’t even restricted to trading — the lesson is that you should dabble relentlessly, and when you have high conviction in a decision, bet everything you can. At least, that’s what you should do if you want a shot at Soros-level success, although you should also consider the risk that you’ll wind up broke.
Meanwhile, in Principles, Ray Dalio lays out a theory of how humans should work together and communicate — total transparency, no-holds-barred criticism, flat hierarchies, brutal honesty. The actual lesson, however, is that if you could ever imagine yourself writing 500 pages on what’s wrong with human behavior, you probably shouldn’t work for somebody else. (Borne out by the fact that Dalio’s final stint working for someone else ended with him getting fired for punching his boss.)
The ego-books are a useful genre, but like all books with an unspoken agenda, they need to be taken with a grain of salt. There are plenty of books on how to win the lottery, and the authors can be totally truthful: If you believe the so-called law of attraction will help you win the lotto, and then win the lottery, you could probably get people to read your book about it. But if, like a million other people, you lost the lottery, see if anyone will buy your book called How the Law of Attraction Didn’t Help Me Win the Lottery at All. Not even the law of attraction will help that one fly off the shelves.
Self-made wealth is the product of some amount of skill, effort, and luck, and you have to think hard about what can be explained by luck and what can’t possibly be. In his memoir What It Takes, Blackstone’s Stephen Schwarzman muses on how everyone says it’s hard to time the market, but he doesn’t think it’s that hard to spot an incipient financial mania. “The idea that no one can see bubbles, as one former chairman of the Federal Reserve once announced, simply isn’t true,” he says. On the other hand, Schwarzman’s firm wrapped up fundraising for its very first fund literally days before the single worst day in U.S. stock market history, and he successfully bought and disassembled a major real estate company in a record-setting deal right before the financial crisis of 2008. So, maybe timing bubbles is easy for him but not for the rest of us. You could chalk up Schwarzman’s record to luck rather than skill, but it’s improbable that anyone was that lucky twice. Apparently, “what it takes” includes but is not limited to preternatural market-timing skills.
It might be false modesty, or it might be that Schwarzman genuinely doesn’t know how hard it is for other people to call the top of the market. In that case, the ego-book is actually falling victim to insufficient ego. Schwarzman is justifiably proud of his market-timing record, because he’s done a great job of buying and selling at the right time. To him, it seems like the hard problem is choosing to be contrarian when you know you’re right. But to most people, the hard problem is being right in the first place — and at the right time.
Some business books are the result of a negotiation. In my head, it goes something like this:
Writer: “I’d like to write a profile of your company.”
CEO: “That’s the last thing I want. I’m not cooperating.”
Writer: “That’s fine. I have a list of people you’ve fired and competitors you’ve crushed, and they have a lot to say about you.”
CEO: “Wait, that’s the last thing I want. I’m clearing my schedule. Consider me at your disposal.”
I’m sure it’s more genteel than that, but that’s the approximate shape of the discussion.
In a recent interview, Gregory Zuckerman explained how he got the notoriously tight-lipped Jim Simons to cooperate, somewhat, on a profile. He calls it the haircut approach: “I’m gonna give you a haircut. You can sit still, or you can move around.” He adds, “It’s not to say that it’s a threat in any way,” which is not really something you have to say if it couldn’t be interpreted that way.
This is really just a long-form version of “access journalism,” where the trade is that journalists get stories straight from the source as long as they make the source look good. A balanced-to-glowing profile that uses the subject and close associates as sources is born as a hatchet job threatening the same person with the worst version of the truth.
One classic example of this is the corporate biography of Salomon Brothers, Advancing to Leadership. Salomon was a high-profile, highly profitable company with plenty of skeletons in its closet — boardroom coups, brutal firings, aggressive business tactics, a major shareholder headquartered in South Africa during apartheid — so the company’s management gave the book’s author, Robert Sobel, plenty of access as long as he told the right version of the story. Sadly for Salomon, the book is famous mostly for being mentioned in Liar’s Poker, an exposé of Salomon’s culture written by a disgruntled bond salesman with a flair for evocative descriptions of sharp-dealing junk bond traders, gluttonous mortgage mavens, clueless C-suite types, and the like.
This polite extortion acts as a check on corporate excess, but only to the extent that the writer is able to tease out useful insights and doesn’t get too cozy with the source. I’ve found that these books emphasize hard work and risk-taking more than raw skill. Luck gets a co-starring role, but usually in an aw-shucks way rather than as a key factor.
When these sorts of books get written, the result is not especially interesting, because the entire work is an exercise in PR deflection. The CEO cooperates on the condition that the egregious parts will be airbrushed out or explained away. The apotheosis of this is surely Softwar, a Larry Ellison bio in which Ellison cooperated on the condition that he be allowed to insert explanatory footnotes. Some of these footnotes rise to the level of either deadpan self-deprecation or egregious self-parody. On page 217, Larry interjects with: “I met Mark out on my deck just as I arrived back home from the gym. I was wearing a black cotton tank top… I have never owned, nor would I ever wear, a pink tank top. This is very important.”
If you say so.
In literary terms, a business failure is a classic tragedy. There’s a hero, cursed with hubris, who rises to great heights and then gets a deserved comeuppance.
Now we get to the good stuff. Most of the best and most popular business books — Bad Blood, Super Pumped, The Spider Network, Too Big to Fail, Smartest Guys in the Room, Barbarians at the Gate — are about things that went wrong, for either nearly everyone or absolutely everyone involved.
Why do disasters and scandals like Theranos, LIBOR manipulation, and Enron get so much coverage? There are two reasons: the literary and the practical.
- In literary terms, a business failure is a classic tragedy. There’s a hero, cursed with hubris, who rises to great heights and then gets a deserved comeuppance. Nobody would write a Greek play about a company that transformed from a startup to a rapid-growth company to a slow-growth company.
- In practical terms, a failure produces way more data than a success. Failures produce a lot of data because they lead to litigation, which leads to discovery, which means thousands of pages of documents to trawl through. (If you’re lazy, just ctrl-F terms like “dubious,” “compliance,” “call my cell asap,” or any obscenity.) They also produce a crop of angry people with lots of time to talk to writers, and these people also want to make sure they don’t get blamed for what went wrong. While they’re data-rich, they’re not strictly informative: Reading about these failures doesn’t actually tell you how to avoid them, because small companies fail by default, while big companies are so durable that they can survive multiple mistakes and it’s only the culmination of lots of problems at once that does them in.
When a company fails spectacularly, it’s a supernova of information: Everyone who was working there has a theory of why their particular efforts would have worked out fine; they also have a theory of exactly who to blame when things went wrong. This means that well-informed people have a strong motivation to tell their version of the story. Most of the people in charge of a failed company have some kind of internal narrative that blames somebody else: “I was a steely-eyed risk taker, willing to make bold bets when nobody else was. That other department was full of idiots who bet the ranch at every opportunity.” “I did whatever it took to get things done, even if that meant bending the rules. Those other guys were crooks!” This creates a deep well of resentment, coupled with lack of self-awareness; the players who try to vindicate their own behavior often end up explaining exactly the organizational pathologies that killed the company.
Bethany McLean and Peter Elkind’s account of Enron’s collapse, The Smartest Guys in the Room, is basically a book built on this circular firing squad of blame. Enron’s traders blamed the infrastructure team for making bad investments; the infrastructure team blamed the traders for making jokes on recorded lines about “all the money you guys stole from those poor grandmothers in California”; the board blamed the accountants for lying; the accountants, uh, didn’t really have much of a case and declined to cooperate. (One of them now gives speeches about corporate ethics, an appropriate form of penance.) Another fun example of this is Gina Keating’s book, Netflixed. I read the book to learn about Netflix, but I wound up learning a lot more about Blockbuster’s failed streaming efforts, because everyone at Blockbuster wanted to tell their side of the story and had the time to tell it.
Consider the source
It’s hard to underestimate the importance of sources in books about business. The best secrets are well-kept, because they’re profitable. If you hear people bragging about an aspect of their business, it’s probably because it’s hard for others to copy — assume that anything Google says about how search works can’t be implemented at Bing scale.
In some controversial cases, you can suss out the source based on who looks good. Bill Gurley comes off as an upstanding, hardworking fellow in Mike Isaac’s Super Pumped. In what is surely a coincidence, the book transcribes a number of conversations in which Gurley was one of just a few people in the room, and he always looks good. The Spider Network by David Enrich is just a classic story of someone on the autism spectrum finding clever ways to exploit the rules of a video game. Unfortunately, the video game in question was the global interest rate derivatives market, and securities regulators have less of a sense of humor about these things than Twitch livestream viewers do.
When times are good, the people who know what’s going on are also too busy making money to talk to journalists. Many investors consider it a bad sign when someone does too many interviews; positive media exposure is a bad sign. Elizabeth Holmes was the most famous CEO in biotech, and Adam Neumann was the second most famous CEO in commercial real estate, after Donald Trump. The ideal founder is someone who ought to be Time’s Person of the Year, but someone nobody at Time has ever heard of.
Despite this somewhat cynical taxonomy, I find business books to be a valuable resource for learning about how the economy works. But I always try to keep in mind that they exist for a reason — some combination of a good story to tell and someone who is strongly motivated to tell their side of the story.
Biased works aren’t intrinsically less valuable than unbiased ones. In fact, it’s hard to imagine someone going to the trouble of writing a book just because they wanted to straightforwardly summarize what was going on. Everyone has an agenda, and that shapes what they say and what they leave out. If you read a book with that in mind, you can mentally cross-examine the main characters—and maybe even figure out what good stuff they deliberately left out.